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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 1998
                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT

For the Transition period from ..................... to ......................

                        COMMISSION FILE NUMBER 0-20328

                                   AMTROL INC
                                   ----------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 RHODE ISLAND                           05-0246955
                 ------------                           ----------
       (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)              IDENTIFICATION NO.)

      1400 DIVISION ROAD, WEST WARWICK, RI                02893
      ------------------------------------                -----
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)

       Registrant's telephone number, including area code: (401) 884-6300
       Securities registered pursuant to Section 12(b) of the Act: NONE.
       Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 30, 1999, the aggregate market value of the Registrant's voting
stock held by non-affiliates was none.

As of March 30, 1999, 100 shares of Common Stock $0.01 par value, of the
Registrant were outstanding.

Documents Incorporated by Reference:  NONE

The Exhibit Index for this document appears on page 59 hereof.

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                                     PART I

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ITEM 1. BUSINESS

OVERVIEW
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      AMTROL Inc ("AMTROL" or the "Company"), is a leading designer,
      manufacturer and marketer of expansion and pressure control products used
      in the water systems markets and selected sectors of the HVAC market. The
      Company's principal products include well water accumulators, hot water
      expansion controls, water treatment products, indirect-fired water
      heaters, returnable and non-returnable pressure-rated cylinders used
      primarily to store, transport and dispense refrigerant, heating and
      cooking gases. Many of these products are based on a technology originated
      and developed by the Company, which uses a pre-pressurized vessel with an
      internal diaphragm to handle fluids under pressure.

      The Company believes that its leading market positions in its key product
      categories are attributable to the strength of AMTROL's brand names and
      product breadth, quality and innovation, as well as its marketing,
      distribution and manufacturing expertise. In addition, AMTROL's principal
      markets are highly replacement-oriented, with 60% to 70% of the Company's
      core business coming from replacement sales. These factors, combined with
      the Company's large installed base of products, have enabled AMTROL to
      demonstrate sales and earnings stability, even during periods of weak
      domestic economic activity.

      AMTROL's brand names are among the most widely known in its markets. For
      example, the Company's EXTROL is widely recognized by customers as the
      leading hot water expansion control tank. Other well-known brand names of
      the Company include Well-X-Trol, Therm-X-Trol, Hot Water Maker and
      CHAMPION. The Company also believes that it is the recognized technology
      leader in virtually all of its core product lines. In many of the
      Company's major product lines, AMTROL's products are considered the
      industry standard, a key marketing advantage.

      The Company's strong reputation and brand recognition ensure that nearly
      every significant plumbing, pump specialty and HVAC wholesaler carries at
      least one AMTROL product. This facilitates new product introduction,
      effectively "pulling" the Company's new products through its distribution
      system. AMTROL also offers a broad range of products. This broad product
      offering allows AMTROL's customers to consolidate their suppliers and to
      purchase and manage inventory more efficiently. These factors have
      established the Company's products as a preferred brand and allow the
      Company to realize premium pricing on most of its branded products. During
      its 50-year history, the Company has built a strong partnership with
      wholesalers and OEMs, resulting in a broad distribution network serving
      approximately 2,000 customers throughout North America. In addition, the
      Company continues to increase its sales to the Do-it-Yourself (DIY)
      market, a rapidly growing channel of distribution, primarily through
      private label arrangements with Lowe's Companies, Menards, Tru*Serv
      Corporation and Ace Hardware.


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      The Company's subsidiary, AMTROL-ALFA Metalomecanica S.A. ("ALFA"),
      located in Guimaraes, Portugal, is Europe's largest manufacturer of
      reusable steel gas cylinders and supplies Europe, the Middle East and
      Africa, as well as the Far East, with containers for storing cooking,
      heating and refrigerant gases. ALFA provides the Company with a low-cost
      international manufacturing base for all of AMTROL's products and is an
      important source of supply for the Company's international customers. In
      1998, in order to take advantage of lower production costs in Portugal,
      the Company completed the relocation of its non-returnable gas cylinder
      production line from Singapore to ALFA. The Company's European and Asian
      non-returnable gas cylinder customers, who had previously been supplied
      from the United States, are now supplied from Alfa.

      In June 1998, the Company acquired NOVA Wassererwarmer GmbH ("NOVA")
      located in Donaueschingen, Germany. NOVA manufactures high-end residential
      and commercial water heaters which are marketed primarily in Germany,
      Switzerland and Austria. This acquisition provides AMTROL with expanded
      manufacturing and distribution capabilities in central Europe, in addition
      to the opportunity to offer many of AMTROL's complementary hydronic
      heating and water systems products in the European market. Furthermore,
      the acquisition of NOVA provides the Company with greater product
      diversification and the ability to penetrate certain markets in the United
      States in which it currently has a limited presence.

      With the acquisition of ALFA and NOVA, approximately 36.2% of the
      Company's net sales in 1998 were derived from international markets,
      compared to 22.3% in 1997.

MERGER AND ACQUISITION
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      On August 28, 1996, AMTROL entered into a merger agreement (the "Merger
      Agreement") with AMTROL Holdings, Inc. ("Holdings") and its wholly-owned
      subsidiary, AMTROL Acquisition, Inc. ("Acquisition"), providing for the
      merger of AMTROL with Acquisition, with AMTROL continuing as the surviving
      corporation (the "Surviving Corporation"). The Merger Agreement was
      approved at a special meeting of shareholders of AMTROL held on November
      12, 1996, and Acquisition was merged with and into AMTROL on November 13,
      1996 (the "Merger"). Each share of common stock of Acquisition was
      converted into and exchanged into one share of common stock of the
      Surviving Corporation, with the result that AMTROL became a wholly-owned
      subsidiary of Holdings, a Delaware corporation controlled by The Cypress
      Group L.L.C. ("Cypress").

      The Company was incorporated in Rhode Island in 1973, and is the successor
      to all of the assets and liabilities of a predecessor Rhode Island
      corporation which was incorporated in 1946. The Company's principal
      executive offices are located at 1400 Division Road, West Warwick, Rhode
      Island 02893 (telephone number: (401) 884-6300).

BUSINESS STRATEGY
--------------------------------------------------------------------------------

      Since the Merger, the Company's strategic focus has been on reducing costs
      and capitalizing on AMTROL's position as a technological and market
      leader. This strategy consists of the following key elements: (i) reduce
      operating expenses, (ii) enhance sales


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      and profitability of core product offerings, and (iii) grow
      internationally and introduce new products.

      REDUCE OPERATING EXPENSES
      --------------------------------------------------------------------------

      Since the merger, the Company initiated a series of actions designed to
      reduce operating expenses and to establish new managerial and
      organizational accountability. These actions are expected to continue to
      generate significant cost savings. The cost savings estimates described
      herein are forward-looking statements based on management budgets.
      Realization of these savings depends upon the effectiveness and timing of
      the planned actions and there can be no assurance that such cost savings
      can be achieved.

      Reduce Corporate Overhead Expenses. Selling, general and administrative
      expenses as a percentage of sales have decreased from 17.8% in 1996 to
      13.8% in 1998. The reduction in SG&A is largely attributable to the
      elimination of redundant and unnecessary functions, particularly at the
      Company's corporate headquarters. Headcount reductions undertaken since
      the merger have decreased the number of persons employed at corporate
      headquarters by approximately 25% since January 1, 1996.

      Continue To Rationalize Manufacturing Facilities. Since 1996, the Company
      has closed four manufacturing facilities, integrating production into
      other facilities, and has sold two non-core business units. These plant
      closures and divestitures have resulted in both cost savings and improved
      asset utilization. Most recently, in December 1997, the Company closed its
      production facility in Nashville, Tennessee and relocated most of the
      Nashville production to the Company's West Warwick, R.I. facility. Much of
      the production in Nashville represented excess capacity which, due to
      improvements in manufacturing efficiency and productivity, the West
      Warwick plant was able to absorb. Costs involved in closing the Nashville
      facility and starting production in West Warwick were higher than
      anticipated due to unexpected retrofitting and reconditioning required for
      the relocated equipment, damage to equipment during shipment, and delays
      in preparing the Nashville building for sale.

      In connection with the plant closures, the Company recorded a $5.5 million
      pre-tax charge in 1997 and a $4.5 million pre-tax charge in 1998, and
      incurred incremental costs due to manufacturing inefficiencies of $3.3
      million in 1998. By the end of 1998, incremental manufacturing
      inefficiencies were substantially eliminated and production levels had
      returned to normal.

      Reduce Manufacturing Costs. The Company will continue to reduce labor
      costs through automating certain labor-intensive manufacturing processes,
      redesigning existing product lines and outsourcing certain operations
      where appropriate. In 1999, the Company expects to begin realizing the
      benefits anticipated in connection with the relocation of the Nashville
      production lines. The Company has identified and intends to implement
      several other manufacturing improvement projects in its North American and
      European plants which are expected to yield additional annual savings in
      1999.


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      ENHANCE SALES AND PROFITABILITY OF CORE PRODUCT OFFERINGS
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      The Company continues to look at initiatives to grow sales and increase
      profitability of its core product offerings. To accomplish this, the
      Company seeks agreements with major OEMs to incorporate AMTROL products
      into complete systems solutions and modifies current products to enhance
      appearance, facilitate installation or meet the requirements of specific
      domestic and international markets. The Company's marketing programs are
      aimed at informing customers about the benefits of AMTROL products. These
      actions increase demand for AMTROL's products and allow AMTROL to realize
      premium pricing.

      EXPAND INTERNATIONALLY AND INTRODUCE NEW PRODUCTS
      --------------------------------------------------------------------------

      By establishing an international presence through acquisitions and
      strategic alliances, management believes the Company's strong brand names,
      broad product offerings and core water systems expertise will allow it to
      capitalize on growing global demand for enhanced water pressure control
      and improved water quality and refrigerant systems. The 1998 acquisition
      of NOVA and the 1997 acquisition of ALFA increased the Company's presence
      overseas significantly: international net sales were 36.2% of total net
      sales in 1998, compared to 22.3% in 1997 and 12.6% in 1996. ALFA presents
      the Company with a low-cost platform from which it can expand distribution
      of its wide variety of products in Europe, the Middle East/Africa and the
      Far East. NOVA provides the Company with expanded manufacturing and
      distribution capabilities in central Europe, in addition to the
      opportunity to offer many of AMTROL's complementary hydronic heating and
      water systems products in the European market. Through a strategic
      alliance with an existing large, international oil company, the Company
      will begin operating a cylinder refurbishing plant in Poznan, Poland in
      the second quarter of 1999. This represents the Company's first entry into
      the fast growing Eastern European market.

      The Company will continue to selectively pursue OEM alliances and
      strategic acquisitions, such as the acquisitions of ALFA and NOVA. The
      Company believes that establishing local manufacturing and distribution
      facilities in international markets significantly enhances the Company's
      ability to build strong customer relationships, understand local product
      preferences and be price competitive while maintaining appropriate profit
      margins. Strategic acquisitions, both domestic and international, provide
      the Company with an effective means of identifying and introducing new
      products and technologies in markets where it already has a strong
      presence. The Company will focus its international expansion on the target
      markets of Western Europe, Latin America, and to a lesser extent, the
      regions of Asia Pacific and Eastern Europe.

      EUROPE. In Europe, the large hydronic heating market (believed by the
      Company to be ten times the size of the U.S. market) and the general lack
      of adequate water pressure in municipal systems represent excellent
      opportunities for the Company in light of its core products expertise. The
      Company's brand names are already well recognized in Europe. The Company
      plans to apply its technical expertise to the special needs of the
      European market and to build on ALFA's product and distribution presence
      in the market for returnable pressure-rated cylinders for heating and
      cooking gases and on NOVA's reputation for quality, innovation and
      engineering expertise in the water heater market.


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      The new cylinder refurbishing plant in Poland provides the Company with a
      manufacturing platform in Eastern Europe and the potential to supply cost
      effectively that region with its water system and hydronic heating
      products. The Company plans to accelerate European growth through
      selective acquisitions, strategic joint ventures and distribution
      agreements.

      LATIN AMERICA, Latin America was the Company's fastest growing sales
      region in 1997 and 1998. The Company will build on its local sales,
      distribution and service capability to better serve its customers in this
      region and to achieve continued growth.

      ASIA/PACIFIC. The economic instability in this region decreased demand for
      the Company's products in the past two years, and the Company's 1999 plans
      do not anticipate a significant rebound in demand. The Company continues
      to maintain its sales presence in the region, and is prepared to pursue
      opportunities in the Asia Pacific region when economic conditions improve.

PRODUCTS AND MARKETS
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      The EXTROL, the first product to utilize the technology developed by
      AMTROL for handling fluid under pressure in hydronic heating systems,
      redefined the standards for controlling the expansion of water in these
      systems. Older systems consisted simply of a vessel containing air,
      resulting in excessive pressure, less efficiency and excessive corrosion.
      AMTROL developed a technology which uses a flexible diaphragm inside a
      pre-pressurized vessel to maintain the separation of air and water in the
      vessel, and has applied this technology in both HVAC products and water
      systems products.

      HVAC PRODUCTS
      --------------------------------------------------------------------------

      AMTROL's sales to selected sectors of the HVAC market, which include sales
      of products such as expansion accumulators, water heaters and
      pressure-rated cylinders for heating and refrigerant gases, accounted for
      approximately 60% of the Company's total sales in 1998. AMTROL's
      residential HVAC products include expansion vessels for heated water,
      potable water heaters and other accessories used in residential HVAC
      systems. AMTROL's commercial HVAC products are substantially identical in
      function to those used in residential applications, with the most
      significant difference being variations required by design codes to meet
      the higher operating pressures of larger systems. AMTROL's pressure-rated
      cylinders for refrigerant gases are used in the storage, transport and
      dispensing of gases used in air conditioning and refrigeration systems. In
      addition, with the acquisition of ALFA, the Company's products include
      returnable pressure-rated cylinders for storing gas used in residential
      and commercial heating and cooking applications.

      EXTROLS. EXTROL expansion accumulators, the first AMTROL product line to
      incorporate the Company's diaphragm technology for handling fluid under
      pressure, are used in conjunction with hydronic heating systems, which
      provide heat by circulating hot water through baseboard piping and
      radiators. The EXTROL product controls pressure in the heating system and
      eliminates problems related to hot water expansion by allowing the volume
      of water to increase as the temperature of the water increases within a
      closed system, preventing operating problems.


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      THERM-X-TROLS. Therm-X-Trols accumulate expanded hot water escaping from
      potable water heaters that has been prevented from flowing back into the
      public water supply by backflow prevention devices. In response to the
      Clean Water Act of 1984, certain jurisdictions established local codes to
      require owners of commercial and residential buildings to install backflow
      prevention devices in order to prevent the contamination of the public
      water supply. Local codes adopted by organizations that set standards for
      approximately 90% of the United States also require a separate device to
      handle the expanded water prevented from flowing back into the public
      water supply. The principal alternatives are relief valves, which permit
      water to drain inside the building, and thermal expansion accumulators,
      such as the Therm-X-Trol, which capture the water. Therm-X-Trol satisfies
      these code requirements, as well as the codes of cities that specifically
      require a thermal expansion accumulator. Additionally, the two largest
      domestic water heater manufacturers will void their warranties if thermal
      expansion accumulators are not used in conjunction with their products
      where backflow prevention devices are installed.

      INDIRECT-FIRED WATER HEATERS. In response to market demands for an
      abundant supply of hot water and energy conservation, AMTROL has developed
      a line of indirect-fired residential and commercial water heaters, which
      it manufactures and distributes under the brand name Hot Water Maker. Used
      in conjunction with a new or existing boiler installed to heat living and
      work areas, these water heaters offer an alternative to conventional gas
      and electric potable water heaters and tankless coils. Hot water is
      generated through the use of heat exchangers and circulators which
      circulate heated water from the boiler through a coil in the core of the
      water heater's reservoir. Hot Water Makers are sold for use in both
      commercial and residential applications. The recent acquisition of NOVA,
      which specializes in water heating products for a wide range of
      applications from very small residential units up to 10,000 liter
      commercial units, provides the Company with greater product
      diversification and the ability to penetrate certain markets in which it
      currently has a limited presence. The Company has recently introduced a
      new line of large capacity stainless steel Hot Water Makers designed for
      light commercial and residential customers who require large amounts of
      hot water and rapid recovery time.

      PRESSURE-RATED CYLINDERS. The Company's ALFA subsidiary, located in
      Portugal, produces and distributes reusable liquid propane gas ("LPG") and
      reusable and non-returnable refrigerant cylinders. It is the largest
      producer of reusable steel gas cylinders in Europe. Reusable LPG cylinders
      are typically purchased by major gas companies or their distributors who
      fill the cylinders for customers who use the gas for heating and cooking
      in residential and commercial applications. In 1998, the Company
      transferred to ALFA the non-returnable cylinder production line previously
      located in Singapore and began supplying its European and Asian
      non-returnable gas cylinder customers from ALFA. AMTROL, together with
      ALFA, is one of two of the world's most significant manufacturers of
      non-returnable pressure-rated cylinders used in the storage, transport and
      dispensing of refrigerant gases for air conditioning and refrigeration
      systems.

      WATER SYSTEMS PRODUCTS
      --------------------------------------------------------------------------

      AMTROL's sales of its water systems products accounted for approximately
      40% of the Company's total net sales in 1998. These products consist
      primarily of water accumulators for residential and commercial well water
      systems and systems and components for residential water softening and
      purification.


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      WELL WATER SYSTEMS. AMTROL produces and sells well water accumulators for
      both residential and commercial applications under the brand names
      Well-X-Trol and CHAMPION, as well as under several private label programs.
      Virtually all of the water accumulators sold by the Company incorporate an
      internally mounted rubber diaphragm that seals an air charge and allows
      pressure to increase as water fills the plastic lined vessel. This design
      serves to control pressure while maintaining the separation of air and
      water in the vessel, thereby eliminating water logging (absorption of air
      into water) as well as reducing wear on switches, pump motors and other
      system components caused by unnecessary on/off cycling. A typical well
      water system consists of a submersible or jet pump located in the well
      that pumps water to an AMTROL pre-pressurized vessel.

      The pre-pressurized vessel is connected to the plumbing system in order to
      provide water on demand at a constant pressure. As the water level and
      pressure in the vessel lowers, the diaphragm flexes, which in turn causes
      the pump to cycle on until a sufficient level of water pressure is
      achieved in the system.

      WATER TREATMENT/FILTRATION PRODUCTS. AMTROL offers a range of products to
      meet increasing global demand for improved water quality and water
      pressure. AMTROL manufactures and markets water softeners, reverse osmosis
      accumulators and other related systems that may be utilized to purify or
      treat residential municipal-supplied and well water. The Company also
      manufactures and markets products that address the need to boost water
      pressure in many domestic and international locations where the available
      pressure is not adequate.

DISTRIBUTION AND MARKETING
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      AMTROL's principal channel of distribution is plumbing, heating and pump
      specialty wholesalers. The Company maintains its presence in the United
      States and Canadian wholesale markets through a network of approximately
      45 independent firms that represent multiple manufacturers, arranging
      sales on a commission basis, as well as approximately 10 salaried direct
      sales professionals. To service its customers with greater efficiency, the
      Company has streamlined its representative network and, through
      consolidation of multiple lines of business, has brought a broader range
      of products to its wholesalers. The Company also provides certain of its
      products to the rapidly growing DIY market segment through a separate
      sales force. AMTROL has private label arrangements with Lowe's Companies,
      Menards, Tru*Serv Corporation and Ace Hardware.

      At its Education Center, which is an integral part of the Company's
      marketing organization, and at Company-sponsored seminars throughout the
      United States and selected international locations, AMTROL provides
      education and training to wholesalers, contractors and engineers,
      independent sales representatives and their employees to assist them in
      understanding the technical aspects of their respective customers'
      requirements and AMTROL's product lines. By educating customers about the
      benefits of AMTROL's products, the Company's products are effectively
      "pulled" through its distribution system.


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      AMTROL's major customers for reusable refrigerant gas cylinders are
      wholesale distributors who sell the products to service providers and
      refrigerant recovery equipment manufacturers. Non-returnable refrigerant
      pressure-rated cylinders are also sold to major chemical companies, which
      produce and package refrigerant gases, and to independent contractors that
      purchase bulk refrigerants and fill the cylinders. ALFA's major customers
      for reusable LPG cylinders are the major European gas companies or their
      distributors.

      With the exception of one customer to whom sales were approximately 7.2%,
      no individual customer represented more than 5% of the Company's net sales
      in 1998.

INTERNATIONAL SALES
--------------------------------------------------------------------------------

      Sales in geographic regions outside of the United States and Canada,
      primarily Mexico, Asia and Western Europe, accounted for 12.6%, 22.3% and
      36.2% of the Company's total net sales in fiscal years 1996, 1997 and 1998
      respectively. The significant increase in foreign sales was driven largely
      by the 1997 acquisition of Alfa and the 1998 acquisition of NOVA. In
      addition, over the last three years AMTROL has opened international sales
      offices in Asia and Europe and has built distribution networks in the
      Asia/Pacific region and Latin America/Mexico.

MANUFACTURING, RAW MATERIALS AND SUPPLIERS
--------------------------------------------------------------------------------

      The Company manufactures water systems and HVAC products using components
      produced in its own facilities, as well as those of outside suppliers. To
      assure quality in its product lines and to enable the Company to respond
      quickly to changing market demands, AMTROL manufactures most critical
      components in its own facilities. The Company has a "Continuous
      Improvement Program" for quality control directed at producing higher
      yields, lower controllable costs per unit, higher order fill rates, better
      on-time delivery and decreased warranty claims. AMTROL believes it has
      developed substantial manufacturing expertise related to its technology
      and its expertise in high quality, low cost manufacturing. This expertise,
      combined with its extensive knowledge of the manufacturing tolerances
      required to handle fluids under pressure, provides a competitive
      advantage. Principal manufacturing processes include thin-wall steel deep
      drawing, welding and rubber injection molding.

      The Company's engineering and development efforts are focused on improving
      the performance, quality and manufacturing cost of its products. In
      addition, the Company pursues opportunities to develop new products and
      processes, and adapt existing products for new applications.

      In September 1997, the Company ceased production operations in Singapore
      and transferred production equipment to its production facility in
      Portugal. The unanticipated high cost structure in Singapore and the
      flexibility provided by the ALFA acquisition were the prime factors
      leading to this decision. In addition, as a result of productivity gains
      achieved at its West Warwick, Rhode Island production facility and as part
      of the Company's strategic initiative to reduce manufacturing costs and
      optimize the utilization of its worldwide manufacturing capacity, the
      Company decided in December 1997 to


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      close its Nashville, Tennessee production facility and relocate production
      to the Rhode Island facility.

      In addition to its ongoing facilities rationalization program, AMTROL has
      implemented a significant capital improvement program with the intention
      of further reducing manufacturing costs. During 1998 and 1997, the Company
      spent approximately $9.9 million and $8.5 million, respectively on capital
      expenditures.

      AMTROL's three principal North American manufacturing facilities and its
      Guimaraes, Portugal facility hold ISO 9001 Certification, the most
      complete certification in the ISO 9000 Series from the International
      Organization for Standardization ("ISO"). ISO certification requires
      periodic audits of AMTROL's systems for product design, development,
      production, installation and servicing, and has become the international
      standard of quality required for manufacturers serving the European
      Economic Community, Southeast Asia, the Middle East and Latin America.

      Raw material suppliers generally offer commodities used by the Company,
      such as steel, synthetic rubber and plastic resins, to all manufacturers
      on substantially similar terms. Significant increases in raw material
      prices can adversely impact margins if the Company is unable to pass on
      such increases to its customers. Manufacturers of component parts also
      generally offer their products to others on substantially similar terms.
      Although certain components are only available from a limited number of
      manufacturers, the Company anticipates that it will be able to purchase
      all of the components it requires without disruption. The Company believes
      that its relationships with its suppliers are good.

SEASONALITY; BACKLOG
--------------------------------------------------------------------------------

      Although AMTROL's sales are related to general economic activity and sales
      of certain of its products are seasonal, its overall business is not
      seasonal to any significant extent. Due to the generally short lead time
      in orders, the Company historically has not carried any material backlog.

PATENTS, TRADEMARKS AND LICENSES
--------------------------------------------------------------------------------

      While the Company owns a number of patents that are important to its
      business, the Company believes that its position in its markets depends
      primarily on factors such as manufacturing expertise, technological
      leadership, superior service and quality and strong brand name
      recognition, rather than on patent protection. The Company believes that
      foreign and domestic competitors have been unable to match the quality of
      AMTROL's branded products.

      The Company also has a number of registered and unregistered trademarks
      for its products. The Company believes the following registered
      trademarks, which appear on its products and are widely recognized in its
      markets, are material to its business: Well-X-Trol(R), Therm-X-Trol(R),
      EXTROL(R), Hot Water Maker(R) and CHAMPION(R).


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COMPETITION
--------------------------------------------------------------------------------

      The Company experiences substantial competition from a number of
      competitors in each of its markets. The Company believes that it is a
      market leader in its core products. The principal means of competition in
      the water systems products and HVAC markets are technology, quality,
      service and price. AMTROL brand name products generally compete on the
      basis of technology, quality, service and product line breadth and
      generally do not compete on the basis of price. No single company competes
      with AMTROL over a significant number of its product lines. As the Company
      expands into international markets, it may experience competition from
      local companies.

EMPLOYEES
--------------------------------------------------------------------------------

      As of December 31, 1998, the Company had approximately 1,875 employees,
      none of whom were represented by collective bargaining units. AMTROL
      considers relations with its employees to be good.

ENVIRONMENTAL MATTERS
--------------------------------------------------------------------------------

      Some of the Company's operations generate waste materials that may give
      rise to liability under environmental laws. Some risk of environmental and
      other damage is inherent in these operations, and in the past, certain of
      the Company's operations have been named a party in private actions
      associated with hazardous waste sites. Based upon the Company's experience
      in matters that have been resolved and the amount of hazardous waste
      shipped to off-site disposal facilities by the Company, the Company
      believes that any share of costs attributable to it will not be material.
      There can be no assurance that any liability arising from, for example,
      contamination at facilities the Company (or an entity or business the
      Company has acquired or disposed of) owns or operates or formerly owned or
      operated, or locations at which waste or contaminants generated by the
      Company (or an entity or business the Company has acquired or disposed of)
      have been disposed of, will not arise or be asserted against the Company
      or entities for which the Company may be responsible in a manner that
      could materially and adversely affect the Company.

      The Company monitors and reviews its procedures and policies for
      compliance with environmental laws. Based upon the Company's experience to
      date, the Company operates in substantial compliance with environmental
      laws, and the cost of compliance with existing regulations is not expected
      to have a material adverse effect on the Company's results of operations,
      financial condition or competitive position. However, future events, such
      as changes in existing laws and regulations or enforcement policies, may
      give rise to additional compliance costs which could have a material
      adverse effect on the Company's results of operations, financial condition
      or competitive position.


                                       11
<PAGE>   12

ITEM 2.     PROPERTIES

The following table sets forth information regarding the Company's principal
properties each of which is owned by the Company unless otherwise indicated:

<TABLE>
<CAPTION>
LOCATION              SQUARE FOOTAGE                       PRINCIPAL USE
--------              --------------                       -------------
                      (approximate)
<S>                       <C>          <C>
West Warwick, RI          270,000      Corporate Headquarters, Manufacturing
                                          All AMTROL Product Lines, Education Center
Guimaraes, Portugal       196,000      Manufacturing Pressure-rated Cylinders
North Kingstown, RI (a)   126,000      Distribution Center for all AMTROL Products
North Kingstown, RI (a)    80,000      Warehouse for Raw Materials And Finished Goods
Donaueschingen, Germany    70,000      Manufacturing Water Heaters
Paducah, KY                46,300      Manufacturing Pressure-rated Cylinders
Mansfield, OH (a)          45,000      Manufacturing and Distribution Center
Baltimore, MD              37,000      Manufacturing Metal Stampings
Kitchener, Ontario(a)      18,400      Distribution
Singapore (a)                 600      Sales Office for Southeastern Asia
England (a)                   400      Administrative Office for Europe and Middle East
Plano, TX                  40,000      Held for Sale
                       ----------
     TOTAL                929,700
</TABLE>

(a) Leased facilities

AMTROL believes that its properties and equipment are generally well maintained,
in good operating condition and adequate for its present needs. The Company
regularly evaluates its manufacturing requirements and believes that it has
sufficient capacity to meet its current and anticipated needs. The inability to
renew any short-term real property lease would not have a material adverse
effect on AMTROL's results of operations.

ITEM 3.     LEGAL PROCEEDINGS

            From time to time, the Company is named as a defendant in legal
            actions. These include commercial disputes, agency proceedings and
            product liability and other claims. Recently, a group of customer
            plaintiffs commenced a suit on their own behalf and a class of
            others "similarly situated," captioned KEN'S OIL & BURNER SERVICE,
            INC., B.F. MURPHY PLUMBING AND HEATING, INC., EARL ALLISON, JOHN
            WHALEN AND ALL OTHERS SIMILARLY SITUATED VS. AMTROL, INC., filed
            February 17, 1999 in Essex Superior Court in Massachusetts seeking
            injunctive relief and unspecified monetary damages alleging breach
            of warranty, product defects and related claims arising from the
            sale of certain of the Company's products. The court has not yet
            determined whether the case may proceed as a class action, and
            management believes that there is a significant likelihood that the
            case will not be certified as a class action. In addition,
            management believes that none of the pending legal actions will have
            a material adverse effect on the Company's results of operations or
            its financial condition.

ITEM 4.     SUBMISSION OF MATTERS TO SECURITY HOLDERS

            Not applicable.


                                       12
<PAGE>   13

                                     PART II

--------------------------------------------------------------------------------

ITEM  5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

            All of the Common Stock of the Company is owned by Holdings; thus,
            no trading market exists for such stock. Similarly, all of the
            common stock of Holdings is held by affiliates of Cypress and
            certain officers of the Company, and no trading market exists for
            such stock. See Item 12, "Security Ownership of Certain
            Beneficial Owners and Management".


                                       13
<PAGE>   14

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below for and as of each of
the years and periods in the five-calendar-year period ended December 31, 1998
have been derived from the Consolidated Financial Statements of the Company,
including the related notes thereto, which have been audited by Arthur Andersen
LLP, independent certified public accountants. The selected consolidated balance
sheet data for November 12, 1996 have been derived from unaudited consolidated
financial statements of the Company which, in the opinion of management, include
all adjustments (consisting only of normal recurring items) necessary for a fair
and consistent presentation of such data. The information set forth below should
be read in conjunction with "Management's Discussion and Analysis of Results of
Operations and of Financial Condition" and with the Consolidated Financial
Statements of the Company, including the related notes thereto, appearing
elsewhere in this Annual Report.

<TABLE>
<CAPTION>
                                                         PREDECESSOR COMPANY                         SUCCESSOR COMPANY
                                            ----------------------------------------      ---------------------------------------
                                              YEAR ENDED     YEAR ENDED   PERIOD ENDED   PERIOD ENDED    YEAR ENDED     YEAR ENDED
                                             DECEMBER 31,   DECEMBER 31,  NOVEMBER 12,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 1994           1995          1996         1996(B)          1997           1998
                                              ---------      ---------     ---------      ---------      ---------      ---------
                                                                                (In thousands)
<S>                                           <C>            <C>           <C>            <C>            <C>            <C>
Statement of Operations Data:
  Net sales                                   $ 173,472      $ 172,454     $ 152,193      $  18,628      $ 176,432      $ 202,142
  Cost of goods sold                            123,184        124,303       110,582         16,809(c)     131,180        158,607
  Provision for abnormal warranty costs              --             --            --             --             --          4,500
                                              ---------      ---------     ---------      ---------      ---------      ---------
  Total cost of goods sold                      123,184        124,303       110,582         16,809        131,180        163,107
    Gross profit                                 50,288         48,151        41,611          1,819         45,252         39,035
  Selling, general and
    administrative expenses                      30,402         29,943        25,796          3,508         25,723         27,827
  Plant closing and reorganization costs             --          3,825            --             --          5,500          4,450
  Management restructuring                           --             --            --             --             --          3,693
  Amortization of goodwill                           --             --            --            313          3,995          4,446
  Other operating expenses                           --             --            --          1,000             --             --
                                              ---------      ---------     ---------      ---------      ---------      ---------
  Income (loss) from operations                  19,886         14,383        15,815         (3,002)        10,034         (1,381)
  Interest (expense) income, net                     (7)            60            53         (2,224)       (18,256)       (20,344)
  License and distributorship fees                  254            258           181             25            245            242
  Other income (expense), net                      (179)            65          (175)           (99)           299          1,384
                                              ---------      ---------     ---------      ---------      ---------      ---------
      Income (loss) before provision
     (benefit) for income taxes                  19,954         14,766        15,874         (5,300)        (7,678)       (20,099)
  Provision (benefit) for income taxes            7,683          5,681         6,152         (1,956)           (30)        (6,728)
                                              ---------      ---------     ---------      ---------      ---------      ---------
  Net income (loss)                           $  12,271      $   9,085     $   9,722      $  (3,344)     $  (7,648)     $ (13,371)
                                              =========      =========     =========      =========      =========      =========

Other Data:
  Depreciation and amortization               $   4,330      $   4,673     $   4,586      $     598      $  11,541      $  13,147
  Capital expenditures                            4,902          5,492         9,260          1,662          8,489          9,858
  EBITDA (a)                                     24,470         23,139        20,582         (2,379)        26,886         29,804

Balance sheet data (at period end):
  Working capital                             $  37,293      $  43,303     $  41,778      $  33,346      $  22,675      $   6,642
  Total assets                                   91,634         93,909        96,280        253,828        291,945        300,667
  Long-term debt, less current maturities         2,381             --            --        159,175        184,164        173,023
  Shareholders' equity                           64,174         70,206        75,783         65,982         58,049         65,948
</TABLE>

(a)   EBITDA represents income (loss) from operations before plant closing
      charges, plus depreciation and amortization and license and
      distributorship fees. EBITDA shown in 1998 excludes costs associated with
      the restructuring and reorganization plan, incremental production
      inefficiencies and the abnormal warranty provision. EBITDA is presented
      because it is a widely accepted indicator of a company's ability to incur
      and service indebtedness. EBITDA (subject to certain adjustments) will be
      used to determine compliance with certain covenants in the Indenture.
      EBITDA, however, should not be considered as an alternative to net income,
      as a measure of the Company's operating results, or as an alternative to
      cash flow as a measure of liquidity.

(b)   Adjusted to reflect a change in the method of determining inventory cost
      from the LIFO method to the FIFO method.

(c)   Reflects a $1.0 million charge related to the upward revision of the
      Company's Workers' Compensation reserve estimate.


                                       14
<PAGE>   15

ITEM 7.      MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF RESULTS OF  OPERATIONS
             AND FINANCIAL CONDITION

      The discussion in this section should be read in conjunction with the
      Consolidated Financial Statements of the Company included elsewhere
      herein.

      This Annual Report includes "forward-looking statements" within the
      meaning of the securities laws. All statements other than statements of
      historical facts included in this Annual Report regarding the Company's
      financial position and cost cutting and strategic plans are
      forward-looking statements. Although the Company believes that the
      expectations reflected in such forward-looking statements are reasonable,
      it can give no assurance that such expectations will prove to have been
      correct. Important factors that could cause actual results to differ
      materially from such expectations include, but are not limited to, the
      Company's ability to successfully implement its new business strategy and
      to achieve the estimated cost savings, the availability and cost of raw
      materials, changes in government regulation or enforcement policies,
      particularly related to refrigerant gases, development of competing
      technologies, acceptance of the Company's existing and planned new
      products in international markets, competition in the Company's markets,
      the rate of growth of developing economies and demand for the Company's
      products, the ability of the Company and its vendors to successfully
      implement their year 2000 compliance initiatives, the ultimate cost of
      future warranties and claims and general economic, financial and business
      conditions, both domestically and internationally.

SIGNIFICANT DEVELOPMENTS
--------------------------------------------------------------------------------

      Following the acquisition of the Company by affiliates of Cypress in 1996,
      management began the execution of a new strategic plan to reduce costs and
      capitalize on AMTROL's position as a technological and market leader.
      Consistent with this strategy, in 1997 the Company sold its less
      profitable American Granby accessory business and its Peru, Indiana
      production facility and the related pump business. In addition, the
      Company closed manufacturing facilities in Singapore and Nashville,
      Tennessee and consolidated manufacturing activities at those plants into
      other AMTROL facilities.

      In July 1997, AMTROL acquired Petroleo Mecanica ALFA, S.A. ("ALFA") based
      in Guimaraes, Portugal. ALFA is Europe's largest manufacturer of reusable
      steel gas cylinders used to store cooking, heating and refrigerant gases.
      The acquisition of ALFA provides the Company with a significant low-cost
      manufacturing base for AMTROL products for distribution in Europe and the
      Far East.

      In June 1998, the Company acquired NOVA Wassererwarmer GmbH ("NOVA")
      located in Donaueschingen, Germany. NOVA manufactures high-end residential
      and commercial water heaters which are marketed primarily in Germany,
      Switzerland and Austria. This acquisition provides AMTROL with expanded
      manufacturing and distribution capabilities in central Europe, in addition
      to the opportunity to offer many of AMTROL's complementary hydronic
      heating and water systems products in the European market.

      The Company expects to integrate its international water and HVAC systems
      business with the manufacturing and distribution operations of ALFA and
      NOVA. For example,


                                       15
<PAGE>   16

      in 1998, the Company transferred to ALFA the non-returnable gas cylinder
      production line previously located in Singapore and began supplying from
      ALFA certain European and Asian gas cylinder customers previously supplied
      from the United States. The Company is exploring opportunities for NOVA to
      manufacture new lines of water heaters designed specifically for certain
      markets in North America.

      During the second quarter of 1998, the Company adopted a plan of
      restructuring and reorganization (the "Plan") to address several adverse
      developments in its North American operations. The Plan addresses
      necessary changes in the Company's West Warwick, Rhode Island facility to
      improve the productivity of the production lines transferred from its
      Nashville, Tennessee facility in 1997, discontinuance of certain product
      lines and recognition of the resulting decline in inventory value for the
      products impacted, and replacement of certain senior executives and others
      on the management team. The Company also determined that mitigating
      actions intended to reduce the level of warranty returns associated with a
      product manufactured in 1995/1996 had not reduced warranty claims relating
      to this product to the extent expected and that an additional warranty
      provision was required. Costs associated with the Plan, manufacturing
      inefficiencies related to the relocated production lines, and the
      additional warranty provision aggregated $17.4 million and have been
      reflected in the accompanying financial statements.

      The Company recently completed the implementation of an Enterprise
      Resource Planning ("ERP") system, based on an Oracle database platform, to
      support its North American operations. This new system will provide the
      Company with a wide range of operational and administrative efficiencies,
      will enable the Company to deliver world class service to its customers,
      and will provide much improved daily, weekly and monthly operational and
      financial information to help the Company monitor and react to
      developments in its business.

OVERVIEW
--------------------------------------------------------------------------------

      AMTROL's principal markets are highly replacement-oriented with 60% to 70%
      of the Company's core business coming from replacement sales. The
      installed base of AMTROL's products in these core markets, combined with
      their stable nature, provide the Company with a consistent and predictable
      base business. Although generally stable, sales are affected by weather,
      as well as general economic activity. The Company monitors well water pump
      sales, existing home sales and boiler shipments in order to gauge activity
      in its markets. Although sales of certain of AMTROL's product lines are
      seasonal in nature, its overall business is not seasonal to any
      significant extent, as seasonal variations of individual product lines
      tend to offset each other.

      SALES. Sales of the Company's HVAC products accounted for approximately
      60% of the Company's total sales in 1998, with the balance represented by
      sales of water systems products. While the percentage of North American
      HVAC sales to total North American sales has been fairly constant, the
      acquisition of ALFA and NOVA, which supply the HVAC market, and the
      disposition of American Granby, which supplied the water systems market,
      caused a decrease in the percentage of the Company's business represented
      by water systems sales starting in 1997.


                                       16
<PAGE>   17

      The Company's HVAC products include indirect-fired water heaters and water
      expansion accumulators for hydronic heating systems, non-returnable
      pressure-rated cylinders for refrigerant gas and returnable cylinders for
      cooking, heating and refrigeration gases. AMTROL believes it has
      opportunities to increase its sales in Europe, currently the world's
      largest hydronic heating market, through a combination of new products and
      strategic acquisitions, such as the 1997 acquisition of ALFA and the 1998
      acquisition of NOVA. ALFA, based in Guimaraes, Portugal, provides the
      Company with a low-cost manufacturing base conveniently situated for
      distribution of AMTROL's products in Europe, the Middle East and Africa.
      NOVA provides the Company with the opportunity to distribute its hydronic
      heating and water systems products in the European market.

      AMTROL's well water accumulators, marketed under the brand names
      Well-X-Trol and CHAMPION, account for approximately two-thirds of the
      Company's total water systems net sales and generally carry higher gross
      profit margins than other product sales. These pre-pressurized vessels are
      distributed through a network of pump specialty and plumbing and heating
      wholesalers and the DIY retail network. The market is continuing to
      experience a modest shift in the channels of distribution from wholesalers
      to DIY retailers, which generally generate slightly lower gross margins.
      Sales of water system accumulators are generally correlated to shipments
      of well water pumps.

      COST OF GOODS SOLD. The principal elements comprising the Company's cost
      of goods sold are raw materials, labor and manufacturing overhead. The
      major raw materials used by the Company in its production process are
      steel, corrugated paper, plastic resins and synthetic rubber. Significant
      increases in raw material prices can adversely impact margins if the
      Company is unable to pass on such increases to its customers. The Company
      has an infrastructure of capital equipment, buildings and related support
      costs and, accordingly, decreases in volume can have a significant adverse
      effect on margins. Cost of goods sold can also be significantly affected
      by changes in product mix.

      The Company has significantly reduced its manufacturing cost base in
      recent years by closing less efficient plants or plants with redundant,
      excess capacity. Production at the closed facilities has been transferred
      to other existing production plants with the anticipated effect of
      lowering the Company's total cost structure and increasing the absorption
      of fixed manufacturing overhead through higher production volume at the
      remaining plants. The Company closed plants in Singapore and Nashville,
      Tennessee in 1997. Production of water systems products at the Nashville
      facility has been transferred to the Company's West Warwick, Rhode Island
      facility, and production of disposable gas containers at the Singapore
      facility has been transferred to the Company's ALFA facility in Portugal.
      In the past, and particularly in 1998, the Company has experienced certain
      inefficiencies and additional costs as it assimilates the transferred
      production into other facilities, and such costs have often delayed the
      realization of expected savings associated with the transfer. The costs
      involved in closing the Nashville facility and starting production in West
      Warwick were higher than anticipated due to unexpected retrofitting and
      reconditioning required for the relocated equipment, damage to equipment
      during shipment, and delays in preparing the Nashville building for sale.
      The Company recorded charges in 1998 relating to the incremental costs
      associated with the Nashville closure and production relocation
      approximating $7.8 million (including $3.3 million of


                                       17
<PAGE>   18

      production inefficiencies included in cost of goods sold). The additional
      costs and inefficiencies associated with relocating the Nashville
      production to the West Warwick facility were substantially eliminated by
      the end of 1998 and the Company expects significant improvement in
      efficiencies in 1999 and beyond as a result of the consolidation of these
      facilities.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Part of the Company's
      strategic focus has been to reduce operating costs. As a result, selling,
      general and administrative expenses as a percentage of sales have
      decreased from 17.8% in 1996 to 13.8% in 1998. A significant portion of
      the cost decrease has been achieved through personnel reductions
      associated with the elimination of redundant and unnecessary functions.
      Position eliminations at the Company's corporate headquarters have
      resulted in an approximate 25% headcount reduction since 1996. The Company
      will continue to rationalize operating costs to take advantage of improved
      information systems and technology.

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

      The following table sets forth, for the periods indicated, the percentage
      relationship to net sales of certain items included in the Company's
      statement of operations:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                     ----- -------------------
                                                      1996      1997      1998
                                                     -----     -----     -----
<S>                                                  <C>       <C>       <C>
Net Sales                                            100.0%    100.0%    100.0%
Cost of Goods Sold                                    74.6      74.4      78.5
Provision for Abnormal Warranty Costs                   --        --       2.2
                                                     -----     -----     -----
Total Cost of Goods Sold                              74.6      74.4      80.7
Gross Profit                                          25.4      25.6      19.3
Selling, General and Administrative Expenses          17.8      14.6      13.8
Plant Closing and Reorganization Costs                  --       3.1       2.2
Management Restructuring                                --        --       1.8
Amortization of Goodwill                               0.1       2.3       2.2
                                                     -----     -----     -----
Income (Loss) from Operations                          7.5       5.6      (0.7)
Interest Expense                                      (1.3)    (10.3)    (10.2)
Interest Income                                         --        --        --
Other Income, net                                       --       0.4       1.0
                                                     -----     -----     -----
Income (Loss) before Provision (Benefit)
     for Income Taxes                                  6.2      (4.3)     (9.9)
Provision (Benefit) for Income Taxes                   2.5        --      (3.3)
                                                     =====     =====     =====
Net Income (Loss)                                      3.7%     (4.3%)    (6.6%)
                                                     =====     =====     =====
</TABLE>

      The comparability of results for the above years is impacted by certain
      acquisitions and disposals, plant closings and restructuring and
      reorganization in 1997 and 1998. Where possible, the impact of these items
      on particular areas of operating results has been explained in the
      remainder of this section.


                                       18
<PAGE>   19

      The percentage of sales, adjusted to exclude American Granby sales in all
      years, comprised by the Company's water systems and HVAC products for the
      periods indicated is listed below:

<TABLE>
<CAPTION>
                                           1996          1997          1998
                                          -----         -----         -----
<S>                                        <C>           <C>           <C>
HVAC Total                                 49.7%         53.8%         60.5%
Water Systems                              50.3%         46.2%         39.5%
                                          -----         -----         -----
     Gross Sales                          100.0%        100.0%        100.0%
                                          =====         =====         =====
</TABLE>

      The amounts and percentage relationships in the above tables for 1996
      combine the results of the predecessor for the period ended November 12,
      1996 and the results of the successor for the period ended December 31,
      1996. The increase in the HVAC percentage of total sales in 1998 is due to
      the inclusion of NOVA sales since June 8, 1998 and a full year of ALFA
      sales.

      COMPARABILITY OF FINANCIAL STATEMENTS. The consolidated financial
      statements of the Company for the periods prior to November 13, 1996 have
      been prepared on the historical cost basis. The Merger was accounted for
      as a purchase transaction. Operating results subsequent to the Merger are
      comparable to prior periods, with the exception of cost of sales (due to a
      $ 1.0 million charge in 1996 related to the reserve estimate and a $2.7
      million inventory charge), and purchase accounting related changes due to
      depreciation expense, amortization of intangible assets and capitalized
      in-process research and development.

FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997.

      NET SALES. Net sales increased $25.7 million or 14.6% in 1998 to $202.1
      million from $176.4 million in 1997. This increase is mainly attributable
      to the full year inclusion of ALFA and the addition of NOVA in June 1998,
      both of which are partially offset by the sale in 1997 of American Granby.
      Net 1998 sales in North America, adjusted for certain markets transferred
      to ALFA in 1998 and the sale of American Granby in 1997, were essentially
      even with 1997. Water systems sales recovered in the last half of 1998
      after being lower earlier in the year due to production disruptions caused
      by unanticipated delays in relocating water system production from
      Nashville to West Warwick, Rhode Island.

      GROSS PROFIT. Gross profit declined $6.2 million in 1998 to $39.0 million
      from $45.2 million in 1997. As noted earlier in this section, the
      comparison of gross profit from 1998 to 1997 is impacted by the recent
      acquisitions of ALFA and NOVA and the 1997 disposition of American Granby.
      Excluding these acquisitions and disposition, gross profit would have
      decreased $9.9 million primarily due to: (i) special warranty charges
      recorded in 1998 and (ii) manufacturing inefficiencies associated with
      relocating production of large water systems. The Company recorded
      abnormal warranty costs of $4.5 million relating primarily to a product
      manufactured in 1995/1996. The circumstances creating the abnormal
      warranty costs have since been corrected but the Company is still
      experiencing higher than normal warranty claims for these products sold in
      previous periods. Furthermore, the Company incurred increased production
      costs of


                                       19
<PAGE>   20

      approximately $3.3 million resulting from difficulties in achieving
      efficient production levels on the production lines relocated to West
      Warwick from Nashville. Increased production costs include higher labor,
      maintenance and scrap, as well as factory overhead. The Company believes
      that incremental manufacturing inefficiencies associated with the
      relocation of the Nashville production were essentially eliminated by the
      end of 1998.

      As a percentage of sales, gross profit in 1998 decreased to 19.3% from
      25.6% in 1997. Without the acquisitions and disposition, warranty charges
      and manufacturing inefficiencies, the 1998 gross profit percentage would
      have been approximately even with 1997.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
      administrative expenses increased $2.1 million or 8.2% in 1998 to $27.8
      million from $25.7 million in 1997. As a percentage of sales, SG&A
      expenses were 13.8% in 1998 compared to 14.6% in 1997. As noted earlier in
      this section, the comparison of 1998 to 1997 is impacted by the recent
      acquisitions of ALFA and NOVA and the 1997 disposition of American Granby.
      Also, SG&A includes $0.4 million of expenses incurred in 1998 relating to
      an acquisition which was not completed and consulting costs of $0.9
      million relating to outside consultants engaged to help facilitate and
      execute the Plan of Restructuring and Reorganization. Without ALFA and
      NOVA, the cost of the failed acquisition and additional consulting
      charges, SG&A would have decreased $2.4 million or 9.8%.

      PLANT CLOSING AND REORGANIZATION COSTS. The Company transferred certain
      production lines from its Nashville facility to its West Warwick, Rhode
      Island facility in December 1997. In connection with the relocation, the
      Company incurred incremental plant closing costs in 1998 of $4.5 million
      resulting from unexpected retrofitting and reconditioning required for the
      relocated equipment, damage to equipment during shipment, and delays in
      preparing the Nashville building for sale. This amount has been reflected
      in the accompanying financial statements.

      MANAGEMENT RESTRUCTURING. The Company, in connection with its Plan of
      Restructuring and Reorganization, has discontinued certain product lines
      and has taken actions to reduce the number of variations offered on many
      of its products, thereby reducing inventory levels. Certain members of
      senior management have left the Company in connection with the Plan. The
      unrecoverable cost of discontinued inventory and the cost of programs to
      reduce the number of product offerings, combined with the cost of post
      employment benefits for departing executives, aggregates $3.7 million and
      has been reflected in the accompanying financial statements. Included in
      selling, general and administrative costs are $0.9 million relating to
      outside consultants engaged to assist with the execution of the Plan.

      INCOME (LOSS) FROM OPERATIONS. For the reasons set forth above,
      income/(loss) from operations decreased $11.4 million to ($1.4) million in
      1998 from $10.0 million in 1997. As noted earlier in this section, the
      comparison of 1998 to 1997 is impacted by the recent acquisitions of ALFA
      and NOVA and the 1997 disposition of American Granby, as well as the plant
      closing and reorganization costs, management restructuring and abnormal


                                       20
<PAGE>   21

      warranty costs. Excluding the effects of these items, income from
      operations would have increased approximately $4.5 million.

      EARNINGS BEFORE INTEREST EXPENSE, TAXES, DEPRECIATION AND AMORTIZATION
      (EBITDA). EBITDA in 1998, before costs associated with the restructuring
      and reorganization plan, incremental production inefficiencies and the
      abnormal warranty provision, amounted to $29.8 million, compared to $26.9
      million in 1997, an increase of $2.9 million or 10.8%.

      EBITDA represents income (loss) from operations plus depreciation and
      amortization, license and distributorship fees, and other income related
      to operations. EBITDA is presented because it is a widely accepted
      indicator of a company's ability to incur and service indebtedness. EBITDA
      (subject to certain adjustments) will be used to determine compliance with
      certain covenants in the Indenture governing the Company's Senior
      Subordinated Notes. (See "Liquidity and Capital Resources"). EBITDA,
      however, should not be considered as an alternative to net income, as a
      measure of the Company's operating results or as an alternative to cash
      flow as a measure of liquidity.

      INTEREST INCOME (EXPENSE), NET. Net interest expense increased $2.1
      million in 1998 from 1997 due to higher debt levels earlier in 1998, the
      inclusion of a full year of ALFA in 1998 and the inclusion of NOVA for
      seven months in 1998.

      INCOME TAXES. Income tax benefit increased $6.7 million in 1998 as
      compared to 1997.

      NET INCOME. The net loss in 1998 of $13.4 million compares to a net loss
      of $7.6 million in 1997.

FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996.

      NET SALES. Net sales in 1997 increased $5.6 million or 3.3% to $176.4
      million from $170.8 million in 1996. This increase was primarily due to
      $17.8 million of sales attributable to ALFA, partially offset by the
      absence of American Granby's sales for eight months in 1997. Excluding the
      impact of the sale of American Granby, net comparable sales attributable
      to the Company's water systems products were virtually flat in 1997. Net
      sales of HVAC products, with ALFA included in 1997, increased $17.3
      million compared to 1996. Without ALFA, HVAC sales would have been
      essentially the same in both years. Container product sales for the year
      increased approximately $1.2 million, resulting from higher volumes, while
      net sales of other HVAC products decreased $1.7 million. The decrease was
      partly caused by a high level of hot water maker product returns resulting
      from an abnormal warranty problem, the causes of which have since been
      corrected. In addition, the sale of the Company's Peru, Indiana production
      facility and the related pump business in May 1997 resulted in the
      discontinuation of a number of products, further contributing to the
      decline HVAC net sales.

      GROSS PROFIT. Excluding the impact of the retroactive LIFO adjustment of
      $1.7 million (see Note 8 to the Financial Statements), gross profit
      increased $0.1 million or 0.2% in 1997 to $45.2 million from $45.1 million
      in 1996. As a percentage of sales, gross profit in 1997 decreased to 25.6%
      from 26.4% in 1996. The inclusion of the operating results of ALFA
      deflated the gross margin percentage in 1997 as the margins on reusable
      steel


                                       21
<PAGE>   22

      gas cylinders produced at this facility are lower than many other AMTROL
      products. Excluding ALFA and American Granby, gross profit in 1997
      decreased $1.3 million (or 3.2%) to $41.2 million from $42.5 million in
      1996, and as a percentage of sales decreased to 27.3% from 28.1% in 1996.
      The lower margin percentage this year was the result of: (i) unusually
      high warranty returns associated with an abnormal warranty problem that
      has since been corrected; (ii) unanticipated higher costs associated with
      the Singapore production facility through the end of August (when the
      facility was closed); and (iii) inefficiencies associated with the
      disruption of the manufacturing process during installation of certain
      major upgrades to manufacturing equipment and processes in 1997.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
      administrative expenses decreased $4.6 million (or 15.1%) in 1997 to $25.7
      million from $30.3 million in 1996. As a percentage of net sales, selling,
      general and administrative expenses decreased in 1997 to 14.6% as compared
      to 17.7% in 1996. The decrease would have been even greater, $5.7 million
      (or 18.9%) if the results of ALFA were excluded. The decrease in selling,
      general and administrative expenses was primarily due to reductions in
      corporate overhead and restructuring of the Company's general and
      administrative staff, in connection with implementing the Company's new
      business strategy. In addition, expenses in 1996 included a one-time
      purchase accounting charge related to capitalized in-process research and
      development of $1.0 million.

      PLANT CLOSING CHARGES. In 1997, the Company recorded a $5.5 million
      pre-tax charge to operating expenses for severance and other costs
      associated with the closures of its plants in Nashville, Tennessee and
      Singapore.

      INCOME FROM OPERATIONS. For the reasons set forth above, income from
      operations decreased $2.8 million in 1997 ($4.5 million excluding the
      retroactive LIFO adjustment) to $10.0 million (after plant closing charges
      of $5.5 million) from $12.8 million in 1996. The inclusion of ALFA in the
      results for 1997 increased operating income by $1.9 million. Excluding the
      effects of goodwill amortization, plant closing charges and the
      acquisition of ALFA on 1997 results, and the retroactive LIFO adjustment,
      the effect of the write-off of capitalized in-process research and
      development and goodwill on 1996 results, operating income in 1997 would
      have increased $1.8 million (or 11.4%) to $17.6 million from $15.8 million
      in 1996.

      EARNINGS BEFORE INTEREST EXPENSE, TAXES, DEPRECIATION AND AMORTIZATION
      (EBITDA) EBITDA in 1997 was $26.9 million compared to $19.9 million in
      1996 (excluding the $1.7 million retroactive LIFO adjustment), an increase
      of $7.0 million.

      INTEREST INCOME (EXPENSE), NET. Net interest expense increased $16.1
      million in 1997 from 1996 due to borrowing costs related to the financing
      of the Merger.

      INCOME TAXES. Income tax expense decreased $4.2 million in 1997 ($4.9
      million excluding the retroactive LIFO adjustment) as compared to 1996.

      NET INCOME (LOSS). The net loss in 1997 of $7.6 million compares to net
      income in 1996 of $6.4 million, an absolute change of $14.0 million ($15.1
      million excluding the retroactive LIFO adjustment).


                                       22
<PAGE>   23

LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

      The Company's cash flows from operating activities were approximately
      $14.7 million, $3.7 million and $1.5 million for the years ended December
      31, 1996, 1997 and 1998, respectively.

      The Company's cash balance increased $0.6 million at December 31, 1998 to
      $1.1 million from $0.5 million in 1997. Although the Company has available
      up to $30 million from its revolving credit facility to meet short-term
      working capital needs, it uses its excess cash to keep borrowing under the
      revolver to a minimum. Amounts available under the revolver approximated
      $27.0 million at December 31, 1998.

      Working capital at December 31, 1998 was $6.6 million and the ratio of
      current assets to current liabilities was 1.1 to 1.0. This compares with
      working capital of $22.7 million in 1997 and a current ratio of 1.5 to
      1.0. The decrease in working capital was the result of a working capital
      optimization program implemented in 1998 which focused on, in the area of
      inventory, eliminating redundant, low volume products and maintaining
      optimum levels of high volume products and, in the area of accounts
      receivable, increasing the collection effort on customers who exceed their
      payment terms and eliminating non-standard terms offered to a number of
      customers. The decrease in working capital was primarily comprised of
      lower accounts receivable of $1.2 million, a decrease in inventory of $5.3
      million, an increase in accounts payable of $5.5 million and an increase
      in notes payable to banks of $6.3 million. The Company achieved lower
      inventory and accounts receivable in 1998 even with significantly higher
      operations at its ALFA facility and the addition of NOVA in 1998.

      Capital expenditures were $10.9 million, $8.5 million and $9.9 million in
      the years ended December 31, 1996, 1997 and 1998, respectively. These
      expenditures related primarily to ongoing maintenance and upgrading of the
      Company's manufacturing technology. Significant expenditures in 1998
      included approximately $2.0 million at ALFA to improve productivity and
      approximately $3.0 million to improve the productivity of the production
      lines relocated to West Warwick, Rhode Island from Nashville. Total
      capital expenditures are expected to be approximately $8.5 million in 1999
      and $8.0 million in 2000.

      Upon consummation of the Merger on November 13, 1996, the Company became
      party to the Bank Credit Facility. The Bank Credit Facility was amended in
      June and December 1997, primarily to permit the acquisition of ALFA, to
      convert borrowings under the Company's revolving credit facility in
      connection with the ALFA acquisition to additional Tranche B Term Loans
      and to permit the closure of the Nashville, Tennessee production facility.
      It was amended again in July 1998 to allow for the early repayment of a
      portion of the principal outstanding and to modify certain covenants to be
      more in line with the Company's business plans. In connection with the
      amendment to the bank Credit Facility, the company repaid $20.5 million on
      August 3, 1998. The Bank Credit Facility, as amended, (the "Facility")
      consists of $54.4 million of senior term loans (the "Term Loans") and a
      $30.0 million revolving credit facility (the "Revolving Credit Facility").
      A portion ($10.2 million) of the Term Loans (the "Tranche A Term Loans")
      will mature on May 13, 2002, with quarterly amortization payments during
      the term of


                                       23
<PAGE>   24

      such loans. The remainder ($44.2 million) of the Term Loans (the "Tranche
      B Term Loans") will mature on May 13, 2004, with nominal quarterly
      amortization prior to the maturity of the Tranche A Term Loans and with
      the remaining amounts amortizing on a quarterly basis thereafter. The
      Revolving Credit Facility includes a sublimit providing for up to $20.0
      million of availability on a revolving credit basis to finance permitted
      acquisitions. The commitments under the Revolving Credit Facility and the
      acquisition sublimit will each reduce by $5.0 million on November 13, 2000
      and $10.0 million on November 13, 2001. The Revolving Credit Facility will
      mature on May 13, 2002. The Bank Credit Facility is secured by
      substantially all assets of the Company and its domestic subsidiaries.

      In connection with the Merger, AMTROL issued $115.0 million of Senior
      Subordinated Notes due 2006 (the "Notes") issued under an Indenture dated
      as of November 13, 1996. The Notes are unsecured obligations of AMTROL.
      The Notes bear interest at a rate of 10.625% per annum and are payable
      semi-annually on each June 30 and December 31 commencing on June 30, 1997.
      The Notes are redeemable at the option of AMTROL on or after December 31,
      2001. From and after December 31, 2001, the Notes will be subject to
      redemption at the option of AMTROL, in whole or in part, at various
      redemption prices, declining from 105.313% of the principal amount to par
      on and after December 31, 2003. In addition, on or prior to December 31,
      1999, the Company may use the net cash proceeds of one or more public
      equity offerings to redeem up to 35% of the aggregate principal amount of
      the Notes originally issued at a redemption price of 110.625% of the
      principal amount thereof plus accrued interest to the date of redemption.
      Upon a "Change of Control" (as defined in the Indenture), each Note holder
      has the right to require the Company to repurchase such holder's Notes at
      a purchase price of 101% of the principal amount plus accrued interest.
      The Indenture contains certain affirmative and negative covenants and
      restrictions. As of December 31, 1998, AMTROL is in compliance with the
      various covenants of the Indenture.

      The Company intends to fund its future working capital, capital
      expenditures and debt service requirements through cash flows generated
      from operations and borrowings under the Revolving Credit Facility
      (described above). Management believes that cash generated from
      operations, together with borrowings available under the Revolving Credit
      Facility, will be sufficient to meet the Company's working capital and
      capital expenditure needs in the foreseeable future. The Company may
      consider other options available to it in connection with funding future
      working capital and capital expenditure needs, including the issuance of
      additional debt and equity securities.

      On July 31, 1998, the Cypress Group L.L.C. and members of senior
      management contributed an additional $20.5 million of new equity into the
      Company's parent, AMTROL Holdings, Inc. In turn, AMTROL Holdings, Inc.
      contributed a like amount to the Company. The Company used the additional
      capital contribution primarily to repay borrowings under the Company's
      Bank Credit Agreement.


                                       24
<PAGE>   25

INFLATION
--------------------------------------------------------------------------------

      The Company believes that inflation does not have a material effect on its
      results of operations or financial condition. To insulate against
      fluctuating prices, the Company has negotiated annual contracts with
      suppliers of certain key raw materials (primarily steel) for a significant
      percentage of its expected usage through 1999.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------------------------------------------------------

      There are no recent accounting pronouncements not yet implemented by the
      Company which will materially impact the Company's financial position or
      results of operations.

YEAR 2000 COMPLIANCE
--------------------------------------------------------------------------------

      The Year 2000 issue is the result of computer programs being written using
      two digits rather than four to define the applicable year. Any of the
      Company's computer programs that have time-sensitive software may
      recognize a date using "00" as the Year 1900 rather than the Year 2000.
      The Company has recently completed the implementation of a new Enterprise
      Resource Planning System ("ERP") in its West Warwick, Rhode Island
      corporate headquarters. The ERP, in addition to providing the Company with
      a wide-range of operational and administrative efficiencies, supports most
      of the Company's North American operations and ensures that virtually all
      of the Company's core business systems are Year 2000 compliant. All
      remaining business software programs are expected to be made Year 2000
      compliant by mid-1999, including those supplied by vendors, or they will
      be retired. The cost to remediate possible exposures resulting from the
      Year 2000 problem cannot be distinguished from the overall cost of the ERP
      which approximated $3.0 million as of the end of 1998. Costs to remediate
      Year 2000 exposures other than costs incurred in connection with the ERP
      are not material.

      The Company communicated with its most significant suppliers to determine
      the extent to which the Company's interface systems are vulnerable to
      those third parties' failure to remediate their own Year 2000 issues. The
      Company has also communicated with its large customers to assess the same
      issue. While there can be no guarantee that the systems of other companies
      on which the Company's system rely will be timely converted and will not
      have an adverse effect on the Company's systems, the Company does not
      believe that its operations are materially vulnerable to the failure of
      any vendor or customer to properly address the Year 2000 issue. The
      Company believes it has no exposure to contingencies related to the Year
      2000 issue for the products it has sold.

      The Company has also initiated formal communications with the vendors
      supplying manufacturing equipment utilizing hardware, software and
      associated embedded computer chips. It estimates that this portion of its
      Year 2000 compliance program will be completed by the third quarter of
      1999.

      The failure to correct a material Year 2000 problem could result in an
      interruption in, or failure of, certain normal business activities or
      operations. Such failures could materially and adversely affect the
      Company's results of operations, liquidity and financial condition. The
      Company believes that the successful implementation of the ERP


                                       25
<PAGE>   26

      supporting the Company's North American operations in 1998 has
      substantially mitigated the most pervasive risks to the Company resulting
      from Year 2000 related computer failures. Due to the general uncertainty
      inherent in the Year 2000 problem, resulting in part from the uncertainty
      of the Year 2000 readiness of third-party suppliers and customers, the
      Company is unable to determine at this time whether the consequences of
      Year 2000 failures will have a material impact on the Company's results of
      operations, liquidity or financial condition. The aforementioned steps
      being undertaken by the Company are expected to significantly reduce the
      Company's level of uncertainty about the Year 2000 problem and, in
      particular, about the Year 2000 compliance and readiness of its material
      suppliers and customers.

      The Company has developed a contingency plan to address exposures to its
      business resulting from possible Year 2000 problems. Because its core
      systems have been made Year 2000 compliant already, the Company's
      contingency plan primarily addresses identifying alternate sources for key
      materials and supplies in the event that the Company's primary vendors are
      not able to supply the Company in a timely fashion. For most such
      materials and supplies, alternate sources have already been identified.
      The Company believes that, with the recent implementation of the ERP and
      the other steps being taken, the possibility of significant interruptions
      of normal operations should be reduced.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The Company is exposed to market risk related to foreign currency exchange
      rates and changes in interest rates, but the impact on 1998 and the
      expected impact on 1999 operating results is not material. The Company
      currently does not use financial or other derivative instruments to hedge
      its foreign currency exposures, which relate primarily to its operations
      in Portugal and Germany. Because a significant portion of its Portuguese
      revenues are denominated in U.S. dollars, the Company's net earnings from
      its Portuguese operation, when translated into U.S. dollars, are not
      significantly exposed to currency fluctuations. While its German
      operations are primarily denominated in German Marks which, when
      translated into U.S. Dollars, can result in higher or lower earnings due
      to currency fluctuations, a 10% fluctuation in the exchange rate between
      Marks and Dollars would have less than a .5% impact on expected 1999
      EBITDA. The Company believes that its cash flow exposure resulting from
      its net foreign currency denominated asset positions in both Portugal and
      Germany is not material.

      The rate of interest on borrowings under the Company's Bank Credit
      Agreement is variable and ranges from: (i) a base rate which is equal to
      the higher of the federal funds rate plus .5% or the bank's prime lending
      rate plus an applicable spread of .75% to 2.0% to (ii) a Eurodollar rate
      plus an applicable spread of from 1.75% to 3.0% (in both cases based on
      the type of loan and the Company's leverage ratio at the time). The
      Company has the option of selecting the interest period (one, two, three,
      six, nine or twelve months) for Eurodollar based loans. The following
      table summarizes the interest rates in effect for the various facilities
      under the Company's Bank Credit Agreement as of December 31, 1998 (in
      thousands):


                                       26
<PAGE>   27

<TABLE>
<CAPTION>
                                                               1999
                                                  ------------------------------
                                                  1st Qtr.   2nd Qtr.   3rd Qtr.
<S>                                               <C>        <C>        <C>
Tranche A                                         $10,200    $ 9,896    $ 9,594
Applicable interest rate                             7.44%      7.44%      7.44%

Tranche B                                         $44,238    $44,123    $44,008
Applicable interest rate                             7.94%      7.94%      7.94%

Revolver                                          $ 3,000
Applicable interest rate                             7.44%
</TABLE>

      The interest rate has not been determined for any amounts due under the
      Bank Credit Agreement beyond the third quarter of 1999. The Company has
      entered into an interest rate swap agreement to limit a portion of its
      exposure to fluctuating interest rates. Under the agreement, the Company
      will pay or receive the difference between the floating three month LIBOR
      rate and a fixed LIBOR rate, applied to a notional amount of $15 million.
      The fixed LIBOR rate is 5.65% in 1999, 5.75% in 2000 and 5.85% thereafter
      until maturity of the agreement on June 30, 2004. The Company's $115
      million of Senior Subordinated Debentures are not subject to market risk
      since the rate of interest on these securities is fixed until maturity in
      2006.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

            The index to financial statements is included on page 35 of this
            report.

ITEM 9.     CHANGES IN THE DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE

            None.


                                       27
<PAGE>   28

                                    PART III

--------------------------------------------------------------------------------

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information regarding each of the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
               NAME              AGE                   POSITION
               ----              ---                   --------
<S>                              <C>       <C>
         John P. Cashman         58        Chairman of the Board

         Albert D. Indelicato    48        President, Chief Executive Officer
                                           and Director

         Edward J. Cooney        51        Executive Vice President, Sales and
                                           Marketing

         Thomas Sturiale         62        Executive Vice President,
                                           Operations and Technology

         Larry T. Guillemette    43        Executive Vice President, Marketing
                                           and Business Development

         Christopher A. Laus     40        Vice President, Quality and
                                           Reengineering

         Donald W. Reilly        40        Vice President, Chief Financial
                                           Officer and Treasurer

         Andrew M. Massimilla    57        Director

         David P. Spalding       44        Director

         James A. Stern          48        Director

         Anthony D. Tutrone      34        Director
</TABLE>

John P. ("Jack") Cashman became Chairman of the Board upon the Merger and served
also as Chief Executive Officer and President until Mr. Indelicato joined the
Company in July 1998. From 1989 until March 1996, Mr. Cashman served as Chairman
and Co-Chief Executive Officer of R. P. Scherer Corporation ("R. P. Scherer").
Mr. Cashman joined R. P. Scherer concurrent with that company's leveraged buyout
in 1989.

Albert D. Indelicato, President and Chief Executive Officer, joined the Company
in July 1998. From 1996 to 1998, he was President of Litorale Holdings, Inc., a
consulting firm specializing in acquisitions. From 1970 to 1996, Mr. Indelicato
served in various managerial capacities of Power Control Technologies and its
predecessor companies, including most recently as Chief Executive Officer and
Director.


                                       28
<PAGE>   29

Edward J. Cooney, Executive Vice President-Sales and Marketing, joined the
Company in 1978. Mr. Cooney served as Chief Financial Officer from 1991 to 1998
and as Treasurer from 1982 to 1998, as Senior Vice President-Operations from
1988 to 1991, and as Vice President from 1985 to 1988.

Thomas Sturiale, Executive Vice President-Operations and Technology, joined the
company in 1998. From 1992-1998, he was President of Neles-Jamesbury, Inc.

Donald W. Reilly, Vice President, Chief Financial Officer, and Treasurer, joined
the Company in 1997 serving as Vice President-Finance from 1997 to 1998. From
May 1992 to October 1997, he was Director of Finance and Corporate Controller of
the A. T. Cross Company.

Larry T. Guillemette, Executive Vice President-Marketing and Business
Development, joined the Company in 1998. From 1991 to 1998, Mr. Guillemette was
President and Chief Executive Officer of Balcrank Products, Inc.

Andrew M. Massimilla became a director of the Company in June 1998. Mr.
Massimilla has been the sole proprietor of a consulting firm providing
management consulting services to various businesses since 1991. He also serves
as a director of Standard Motor Products Company, a New York Stock Exchange
Company.

David P. Spalding became a director of the Company upon the Merger. Mr. Spalding
has been Vice Chairman of Cypress since its formation in April 1994. Prior to
joining Cypress, he was Managing Director in the Merchant Banking Group of
Lehman Brothers Inc. since February 1991. Mr. Spalding is also a director of
Lear Corporation, William Scotsman, Inc., and Frank's Nursery & Craft, Inc.

James A. Stern became a director of the Company upon the Merger. Mr. Stern has
been Chairman of Cypress since its formation in April 1994. Prior to joining
Cypress, Mr. Stern spent his entire career with Lehman Brothers Inc., most
recently as head of the Merchant Banking Group. Mr. Stern is a director of Noel
Group, Inc., Lear Corporation, Cinemark USA, Inc., R.P. Scherer, Genesis
ElderCare Corp., Wesco International Inc. and Frank's Nursery & Craft, Inc.

Anthony D. Tutrone became a director of the Company upon the Merger. Mr. Tutrone
is a managing director of Cypress and has been a member of the firm since its
formation in April 1994. Prior to joining Cypress, he was a member of the
Merchant Banking Group of Lehman Brothers, Inc. Mr. Tutrone is also a director
of Wesco International Inc.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
--------------------------------------------------------------------------------

Not applicable

ITEM 11.    EXECUTIVE COMPENSATION

The following table summarizes the compensation paid or accrued by the Company
to its Chief Executive Officer and the four other most highly compensated
executive officers who earned


                                       29
<PAGE>   30

more than $100,000 in salary and bonus in 1998 in each case for services
rendered in all capacities to the Company during the three year period ended
December 31, 1998:

<TABLE>
<CAPTION>
                            SUMMARY COMPENSATION TABLE
                            --------------------------
                                                      LONG TERM
                                       ANNUAL        COMPENSATION
                                  COMPENSATION (a)      AWARDS
                                  ----------------      ------
                                                      SECURITIES      ALL OTHER
   NAME AND PRINCIPAL             SALARY              UNDERLYING    COMPENSATION
        POSITION           YEAR     (b)     BONUS    OPTIONS/SARS        (c)
        --------           ----     ---     -----    ------------        ---
<S>                        <C>   <C>       <C>        <C>             <C>
John P. Cashman            1998  $453,200     --          --          $15,215
Chairman (d)               1997   440,000   49,720    44,796 (e)       17,000
                           1996     --        --          --             --

Albert D. Indelicato (h)   1998   132,692  130,000        --            1,406
President and Chief        1997     --        --          --             --
Executive Officer          1996     --        --          --             --

Edward J. Cooney           1998   185,400   10,000        --            3,940
Executive Vice President-  1997   180,000   20,340     6,838 (f)        8,862
Sales and Marketing        1996   169,329   44,010    12,000 (g)        8,795

Thomas Sturiale (h)        1998   113,336   25,000        --             --
Executive Vice             1997     --        --          --             --
President-Operations and   1996     --        --          --             --
Technology

Donald W. Reilly (h)       1998   134,615  25,000         --            1,483
Vice President-            1997    22,500   20,000        --               47
Chief Financial Officer    1996     --        --          --             --
</TABLE>

(a)   Any prequisites or other personal benefits received from the Company by
      any of the named executives were substantially less than the reporting
      thresholds established by the Securities and Exchange Commission (the
      lesser of $50,000 or 10% of the individual's cash compensation).

(b)   Includes portion of salary deferred under the Company's 401(k) Plan.

(c)   Amounts paid in 1998 include the Company's contributions under the
      Company's 401(k) Plan in the amount of $15,215, $1,038, $2,500 and $1,194
      for Messrs. Cashman, Indelicato, Cooney, and Reilly, respectively, and
      premiums paid by the Company with respect to term life insurance purchased
      for such executive officers in the amount of $368, $1,440 and $289 for
      Messrs. Indelicato, Cooney and Reilly, respectively.

(d)   Mr. Cashman joined the Company on November 13, 1996, upon consummation of
      the Merger, but received no compensation until 1997.


                                       30
<PAGE>   31

(e)   These are non-qualified options to purchase common stock of Holdings, the
      parent corporation of AMTROL. These options are immediately exercisable.
      Shares purchased under the options are subject to repurchase by Holdings
      at the exercise price upon certain circumstances. Options for 22,398
      shares are released from restrictions based upon continued employment,
      with 7,454 shares released immediately and 14,944 shares released in 32
      equal monthly installments through August 2000. As of December 31, 1998,
      share options released from restrictions amounted to 13,058. As of
      December 31, 1998, vested incentive stock options amounted to 1,999.
      Options for 22,398 shares are released from restrictions based upon
      relative achievement of management's business plan for fiscal years 1997
      through 2001. One-half of such performance-based options are released from
      restriction based upon annual performance and one-half based upon
      cumulative performance. Restrictions lapse upon a public offering or sale
      of Holdings, AMTROL or substantially all of the assets of AMTROL (a
      "Triggering Event").

(f)   These represent options to purchase common stock of Holdings. One-half
      (3,419 shares) of these options are incentive stock options which vest
      1,000 shares in December 1997, 218 shares in January 1998 and the balance
      in 31 equal monthly installments of 71 shares through August 2000.
      One-half (3,419 shares) of these options are non qualified stock options
      which are immediately exercisable, provided that purchased shares are
      subject to repurchase by Holdings at the exercise price until such shares
      vest based upon relative achievement of management's business plan for
      fiscal years 1997 through 2001. One-half of such performance based options
      vest based upon annual performance and one-half based upon cumulative
      performance. Options vest and restrictions lapse upon a Triggering Event.

(g)   These represent options to purchase common stock of AMTROL, which, in
      connection with the Merger, were either canceled in exchange for cash
      equal to the spread between the option exercise price and $28.25 per share
      (the per share Merger consideration) or exchanged for options exercisable
      for Holdings' common stock based on a conversion ratio of .2825 per share
      of Holdings' common stock for each share of AMTROL common stock.

(h)   Mr. Indelicato joined the Company in July 1998, Mr. Sturiale in April 1998
      and Mr. Reilly in October 1997.


                                       31
<PAGE>   32

OPTION PLANS
--------------------------------------------------------------------------------

The following table sets forth certain information regarding currently
outstanding options held by the named executive officers as of December 31,
1998. No options were granted to or exercised by the named executives in 1998:

<TABLE>
<CAPTION>
             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                           YEAR-END OPTION/SAR VALUES
             -------------------------------------------------------
                                                   NUMBER OF
                                                  SECURITIES
                                                  UNDERLYING
                                                  UNEXERCISED
                                                  OPTION/SARS
                       NUMBER OF                   AT FISCAL
                       SECURITIES                  YEAR END         VALUE OF
                       UNDERLYING                  1998 (a)        UNEXERCISED
                      OPTIONS/SARS     VALUE     EXERCISABLE/     IN-THE-MONEY
NAME                   EXERCISED    REALIZED($)  UNEXERCISABLE  OPTIONS/SAR($)(b)
----                   ---------    -----------  -------------  -----------------
<S>                          <C>        <C>       <C>               <C>
John P. Cashman              0          0         44,796/0                0/0
Edward J. Cooney             0          0          8,257/1,420      100,003/0
</TABLE>

(a)   Immediately prior to the Merger, Mr. Cooney exchanged options exercisable
      for AMTROL common stock for options exercisable for Holdings common stock
      ("Amended Options") based on a conversion ratio of .2825 share of Holdings
      common stock for each share of AMTROL common stock subject to the option.
      Includes 2,839 shares of Holdings common stock subject to Amended Options
      received by Mr. Cooney in the exchange. The Amended Options are fully
      exercisable.

(b)   Based on the market value of $100 per share (determined by the Holdings
      Board of Directors to be the purchase price of Holdings common stock
      issued in connection with the Merger) less the exercise price of the
      options.

SUPPLEMENTAL RETIREMENT PLANS
--------------------------------------------------------------------------------

      The Company maintains two Supplemental Retirement Plans: Supplemental
      Retirement Plan I which covers a former officer and director and
      Supplemental Retirement Plan II which covers Mr. Cooney and two former
      officers. Under Supplemental Retirement Plan I, the former officer is
      entitled to receive an annual benefit of $150,000 per year for 15 years
      following his retirement. In January 1997, he began to receive the annual
      benefit in equal quarterly installments. Mr. Cooney is entitled to receive
      an annual benefit of $50,000 per year for a period of 15 years upon
      retirement on or after age 62. The retirement benefit is forfeited in its
      entirety if he terminates employment or dies prior to age 62. The Company
      has purchased a split-dollar life insurance policy on Mr. Cooney to
      provide a death benefit not to exceed $300,000. If his employment is
      terminated prior to retirement he may purchase the policy from the
      Company. In the event a participant in either Supplemental Retirement Plan
      dies after retirement, his beneficiary will receive any remaining benefits
      which such participant was entitled to receive at the time of his death.


                                       32
<PAGE>   33

EMPLOYMENT AGREEMENTS AND OTHER TRANSACTIONS
--------------------------------------------------------------------------------

      The Company, either directly or through its subsidiaries, has entered into
      employment agreements (each referred to individually as an "Agreement" and
      collectively as the "Agreements"), with Messrs. Cashman, Cooney,
      Indelicato and Reilly to secure their continued employment with the
      Company. The Agreements provide for an annual base salary, subject to
      annual adjustments, of $440,000, $180,000, $300,000 and $130,000 for
      Messrs. Cashman, Cooney, Indelicato and Reilly, respectively. In addition,
      the executives are entitled to participate in incentive compensation plans
      and all employee benefit arrangements generally appropriate to such
      executive's responsibilities. In the event the executive's employment is
      terminated without cause by the Company or, for Messrs. Cashman and
      Cooney, with Good Reason by the executive, such executive after
      termination is entitled to: continuation of monthly salary, including the
      pro rata portion of any bonus or other incentive compensation otherwise
      payable for the fiscal period in which such termination occurs, and
      maintenance of all life, disability, medical and health insurance benefits
      to which the executive was entitled immediately prior to termination. The
      duration of such benefits is 24 months, 24 months, 18 months and 15 months
      for Messrs. Cashman, Cooney, Indelicato and Reilly, respectively. In the
      case of Mr. Cashman, the Agreement provides that in the event of his
      death, his estate is entitled to receive an amount equal to the monthly
      termination benefit for 24 months, reduced by any amounts payable under
      any insurance or other plan providing a death benefit which is maintained
      by the Company. In the case of Messrs. Cashman and Cooney, the Agreements
      also prohibit the executive, for a period of two years after the
      termination of his employment, from directly or indirectly, advising,
      assisting or being connected with any enterprise which competes with the
      Company.

      In addition, under separate Management Stockholder's Agreements between
      Holdings and Messrs. Cashman and Cooney if, prior to a public offering of
      the common stock of Holdings, the executive dies or becomes disabled while
      employed by the Company or following normal retirement or the executive's
      employment is terminated without Cause by the Company or with Good Reason
      by the executive (as such terms are defined in the agreements), the
      executive has the right to require Holdings to purchase all or any portion
      of Holdings common stock then held by the executive at the repurchase
      price specified in the agreement and to pay the executive the amount by
      which the repurchase price exceeds the exercise price of any options then
      held by the executive. If there exists and is continuing an event of
      default on the part of the Company under any loan guarantee or other
      agreement under which the Company has borrowed money or such repurchase
      would result in an event of default, the Company shall not be obligated to
      repurchase any of the common stock. The repurchase price is $100 if the
      repurchase occurs prior to November 13, 1999, and the market price of the
      Holdings common stock thereafter. If an executive's employment is
      terminated for Cause by the Company or without Good Reason by the
      executive, Holdings has the right to purchase all, but not less than all,
      Holdings common stock then held by the executive at a price equal to the
      lesser of $100 or the market price of the Holdings common stock, provided
      that if the executive's employment is terminated by the executive without
      Good Reason following a public offering, the repurchase price is the
      market price of the Holdings common stock. If Holdings exercises its
      repurchase right it must also pay the executive an amount equal to the
      excess of the repurchase price over the exercise price of any options held
      by the


                                       33
<PAGE>   34

      executive in cancellation of such options. Good Reason includes certain
      significant changes in the nature of the executive's employment including
      certain reductions in compensation and changes in responsibilities and
      powers.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

            The Company is a direct, wholly owned subsidiary of Holdings. The
            following table sets forth information with respect to the
            beneficial ownership of Holdings common stock or preferred stock as
            of March 15 by (i) each person known to the Company to beneficially
            own more than 5% of Holdings' outstanding common stock, (ii) each of
            the Company's directors and named executive officers and (iii) all
            directors and executive officers of the Company as a group. Each
            share of Holdings preferred stock is convertible at any time into
            one share of Holdings common stock. Unless otherwise indicated
            below, the persons and entities named in the table have sole voting
            and investment power with respect to all shares beneficially owned.

<TABLE>
<CAPTION>
                                                    COMMON STOCK             PREFERRED STOCK
                                                    ------------             ---------------

                                                NUMBER OF   PERCENTAGE    NUMBER OF    PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER             SHARES      OF TOTAL       SHARES      OF TOTAL
------------------------------------             ------      --------       ------      --------
<S>                                              <C>           <C>          <C>          <C>
Cypress Merchant Banking Partners L.P. (a)
c/o The Cypress Group L.L.C
65 East 55th Street, 19th Floor
New York, NY 10022                               733,033       93.0%        95,076       92.8%

Cypress Offshore Partners L.P. (a)
c/o The Cypress Group L.L.C
65 East 55th Street, 19th Floor
New York, NY 10022                                37,967        4.8%         4,924        4.8%

John P. Cashman(c)                                62,032        7.4%         2,235        2.2%
Edward J. Cooney(b)(c)                             8,771        1.1%           250        0.2%
Albert D. Indelicato                                  --         --             --         --
Andrew Massimilla                                     --         --             --         --
David P. Spalding(a)                                  --         --             --         --
James A. Stern(a)                                     --         --             --         --
Thomas Sturiale                                       --         --             --         --
Anthony D. Tutrone                                    --         --             --         --
Donald W. Reilly                                      --         --             --         --
All directors and executive officers as a
group (consisting of 12 persons)                  70,823        8.4%         4,924        4.8%
</TABLE>

            (a)   Cypress Merchant Banking Partners L.P. and Cypress Offshore
                  Partners L.P. are affiliates of The Cypress Group L.L.C.
                  Messrs. Spalding and Stern are executives of The Cypress Group
                  L.L.C. and may be deemed to share beneficial ownership of the
                  shares shown as beneficially owned by such Cypress entities.
                  Each of such individuals disclaims beneficial ownership of
                  such shares. See Item 10, "Directors and Executive Officers of
                  the Registrant."

            (b)   Immediately prior to the Merger, Mr. Cooney exchanged options
                  exercisable for AMTROL Common Stock for options exercisable
                  for Holdings common stock. Includes 2,839 shares of common
                  stock issuable upon exercise of such options by Mr. Cooney,
                  respectively. See Item 11, "Executive Compensation".


                                       34
<PAGE>   35

            (c)   Includes 44,796 and 8,541 shares of Common Stock issuable upon
                  exercise of options granted to Messrs. Cashman and Cooney,
                  respectively, which will become exercisable within 60 days.
                  See Item 11, "Executive Compensation".

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      A director of the Company, Mr. Massimilla, provides management consulting
      services to the Company for which he is paid by the Cypress Group L.L.C.
      The Company reimburses Cypress for its payments to Mr. Masimilla. During
      1998, the amount of such payments was $439,000.

PART IV

--------------------------------------------------------------------------------

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULE & REPORTS ON FORM 8-K

(A)(1) FINANCIAL STATEMENTS

      The following financial statements are included in a separate section of
      this Report commencing on the page numbers specified below:

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                         <C>
      Report of Independent Public Accountants                              37

      Consolidated Balance Sheets as of December 31, 1997 and 1998          39

      Consolidated Statements of Operations for the Period Ended
      November 12, 1996 (Predecessor), Period Ended December 31, 1996 and
      Fiscal Years Ended December 31, 1997 and 1998 (Successor)             40

      Consolidated Statements of Shareholders' Equity for the Period Ended
      November 12, 1996 (Predecessor), Period Ended  December 31, 1996 and
      Fiscal Years Ended December 31, 1997 and 1998 (Successor)             41

      Consolidated Statements of Cash Flows for the Period Ended
      November 12, 1996 (Predecessor), Period Ended December 31, 1996 and
      Fiscal Years ended December 31, 1997 and 1998 (Successor)             42

      Notes to Consolidated Financial Statements                            43

(A)(2) FINANCIAL STATEMENT SCHEDULE

      Schedule II - Valuation and Qualifying Accounts and Reserves for the
      Period Ended November 12, 1996 (Predecessor), Period Ended December
      31, 1996 and Fiscal Years Ended December 31, 1997 and 1998
      (Successor)                                                           57
</TABLE>


                                       35
<PAGE>   36

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

(A)(3) EXHIBITS

      See List of Exhibits

(B) REPORTS FILED ON FORM 8-K

      None


                                       36
<PAGE>   37

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO AMTROL INC.:

We have audited the accompanying consolidated balance sheets of AMTROL Inc. (the
Successor), (a Rhode Island corporation and wholly-owned subsidiary of AMTROL
Holdings Inc.), and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 1998 and 1997 and for the period from
November 13, 1996 to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMTROL Inc. and subsidiaries as
of December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1998 and
the period from November 13, 1996 to December 31, 1996 in conformity with
generally accepted accounting principles.

As explained in Note 8 to the financial statements, the Company has given
retroactive effect to the change in accounting for the cost of inventories from
the LIFO method to the FIFO method.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financials statements taken as a whole. The financial statement
schedule listed in item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.


                                                /s/ Arthur Andersen LLP


Boston, Massachusetts
March 19, 1999


                                       37
<PAGE>   38

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO AMTROL INC.:

We have audited the accompanying consolidated statement of operations,
shareholders' equity and cash flows of AMTROL Inc. (the Predecessor), (a Rhode
Island corporation), and subsidiaries for the period from January 1, 1996 to
November 12, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of AMTROL Inc. and subsidiaries' operations
and their cash flows for the period from January 1, 1996 to November 12, 1996,
in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The financial statement
schedule listed in item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.


                                                /s/ Arthur Andersen LLP


Boston, Massachusetts
March 6, 1997


                                       38
<PAGE>   39

                          AMTROL INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets
                                 (In thousands)
                                     Assets

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                                    1997         1998
                                                                 ---------    ---------
<S>                                                              <C>          <C>
Current Assets:
  Cash and cash equivalents                                      $     544    $   1,088
  Accounts receivable, less allowance for doubtful accounts of
    $1,088 and $1,594 in 1997 and 1998, respectively                30,180       28,938
  Inventories                                                       29,584       24,319
  Income tax refund receivable                                         323          930
  Prepaid income taxes                                               2,495        2,271
  Prepaid expenses and other                                         1,089        2,311
  Assets held for sale                                               1,533          572
                                                                 ---------    ---------
    Total current assets                                            65,748       60,429
                                                                 ---------    ---------

Property, Plant and Equipment, at cost
  Land                                                               5,000        6,186
  Buildings and improvements                                         9,799       13,530
  Machinery and equipment                                           34,875       40,537
  Furniture and fixtures                                             1,192        1,098
  Construction-in-progress and other                                 1,818        4,817
                                                                 ---------    ---------
                                                                    52,684       66,168
  Less: accumulated depreciation and amortization                    6,997       14,385
                                                                 ---------    ---------
                                                                    45,687       51,783
                                                                 ---------    ---------
Other Assets:
  Goodwill                                                         169,784      171,166
  Deferred financing costs                                           7,762        6,770
  Deferred income taxes                                              1,065        8,205
  Other                                                              1,899        2,314
                                                                 ---------    ---------
                                                                   180,510      188,455
                                                                 ---------    ---------
                                                                 $ 291,945    $ 300,667
                                                                 =========    =========

                      Liabilities and Shareholders' Equity
Current Liabilities:
  Current maturities of long-term debt                           $   3,498    $   4,043
  Notes payable to banks                                             4,397       10,660
  Accounts payable                                                  15,718       21,193
  Accrued expenses                                                  15,779       14,242
  Accrued interest                                                     608          777
  Accrued income taxes                                               3,073        2,872
                                                                 ---------    ---------
    Total current liabilities                                       43,073       53,787
                                                                 ---------    ---------

Other Noncurrent Liabilities                                         6,659        7,909
Long-Term Debt, less current maturities                            184,164      173,023

Commitments and Contingencies                                           --           --

Shareholders' Equity
  Capital stock $.01 par value - authorized 1,000 shares,
    100 shares issued                                                   --           --
  Additional paid-in capital                                        69,326       89,823
  Retained deficit                                                 (10,992)     (24,363)
  Accumulated other comprehensive (loss) income                       (285)         488
                                                                 ---------    ---------
    Total shareholders' equity                                      58,049       65,948
                                                                 ---------    ---------
                                                                 $ 291,945    $ 300,667
                                                                 =========    =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       39
<PAGE>   40

                                    AMTROL INC. AND SUBSIDIARIES

                               Consolidated Statements of Operations
                                           (In thousands)

<TABLE>
<CAPTION>
                                              PREDECESSOR
                                                COMPANY                      SUCCESSOR COMPANY
                                               ---------        -------------------------------------------
                                              PERIOD ENDED     PERIOD ENDED      YEAR ENDED       YEAR ENDED
                                              NOVEMBER 12,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                  1996             1996             1997             1998
                                               ---------        ---------        ---------        ---------
<S>                                            <C>              <C>              <C>              <C>
Net Sales                                      $ 152,193        $  18,628        $ 176,432        $ 202,142

Cost of goods sold                               110,582           16,809          131,180          158,607
Provision for abnormal warranty costs                 --               --               --            4,500
                                               ---------        ---------        ---------        ---------
Total Cost of Goods Sold                         110,582           16,809          131,180          163,107

  Gross Profit                                    41,611            1,819           45,252           39,035

Operating Expenses:
  Selling                                         14,236            1,997           13,175           11,951
  General and administrative                      11,560            1,511           12,548           15,876
  Plant closing and reorganization costs              --               --            5,500            4,450
  Management restructuring                            --               --               --            3,693
  Amortization of goodwill                            --              313            3,995            4,446
  Other operating expenses                            --            1,000               --               --
                                               ---------        ---------        ---------        ---------
  Income (loss) from operations                   15,815           (3,002)          10,034           (1,381)

Other Income (Expense):
  Interest expense                                  (151)          (2,263)         (18,684)         (20,554)
  Interest income                                    204               39              428              210
  License and distributorship fees                   181               25              245              242
  Other, net                                        (175)             (99)             299            1,384
                                               ---------        ---------        ---------        ---------
    Income (loss) before provision
    (benefit) for income taxes                    15,874           (5,300)          (7,678)         (20,099)

Provision (Benefit) for Income Taxes               6,152           (1,956)             (30)          (6,728)
                                               ---------        ---------        ---------        ---------
Net Income (Loss)                              $   9,722        $  (3,344)       $  (7,648)       $ (13,371)
                                               =========        =========        =========        =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       40
<PAGE>   41

                          AMTROL INC. AND SUBSIDIARIES

                 Consolidated Statements of Shareholders' Equity
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED          TREASURY STOCK
                                                           ADDITIONAL    RETAINED         OTHER          ---------------------
                                               COMMON        PAID-IN     EARNINGS     COMPREHENSIVE     NUMBER OF
                                                STOCK        CAPITAL     (DEFICIT)    (LOSS) INCOME       SHARES        COST
                                              --------      --------     --------        --------        --------     --------
<S>                                           <C>           <C>          <C>             <C>                  <C>     <C>
PREDECESSOR COMPANY

Balance, December 31, 1995                    $     76      $ 29,083     $ 44,313        $     --             213     $  3,266

  Net income                                        --            --        9,722              --              --           --
  Dividend                                          --            --       (6,694)             --              --           --
  Exercise of stock options                                      191           --              --              --           --
  Repurchase of common stock                        --            --           --              --               1           15
                                              --------      --------     --------        --------        --------     --------

Balance, November 12, 1996                          76        29,274       47,341              --             214        3,281
                                              ========      ========     ========        ========        ========     ========

SUCCCESSOR COMPANY

  Net loss as previously reported                   --            --       (2,289)             --              --           --
  Issuance of common stock in
    connection with Merger, net                     --        69,326           --              --              --           --

                                              --------      --------     --------        --------        --------     --------
Balance, December 31, 1996 as
  previously reported                               --        69,326       (2,289)             --              --           --

  Adjustment for applying retroactively
    the new method of valuing inventories
    net of tax benefit (Note 8)                                            (1,055)

                                              --------      --------     --------        --------        --------     --------
Balance, December 31, 1996 as adjusted              --        69,326       (3,344)             --              --           --


  Net loss                                          --            --       (7,648)             --              --           --
  Currency translation adjustment                   --            --           --            (285)             --           --

                                              --------      --------     --------        --------        --------     --------
Balance, December 31, 1997                          --        69,326      (10,992)           (285)             --           --

  Capital contribution                              --        20,497           --              --              --           --
  Net loss                                          --            --      (13,371)             --              --           --
  Currency translation adjustment                   --            --           --             773              --           --

                                              --------      --------     --------        --------        --------     --------
Balance, December 31, 1998                          --        89,823      (24,363)            488              --           --
                                              ========      ========     ========        ========        ========     ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       41
<PAGE>   42

                          AMTROL INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                  PREDECESSOR
                                                                    COMPANY                      SUCCESSOR COMPANY
                                                                   ---------        -------------------------------------------
                                                                  PERIOD ENDED     PERIOD ENDED      YEAR ENDED       YEAR ENDED
                                                                  NOVEMBER 12,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                                      1996             1996             1997             1998
                                                                   ---------        ---------        ---------        ---------
<S>                                                                <C>              <C>              <C>              <C>
Cash Flows Provided by Operating Activities:
  Net income (loss)                                                $   9,722        $  (3,344)       $  (7,648)       $ (13,371)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities -
      Depreciation and amortization                                    4,586              598           11,541           13,147
      Provision for losses on accounts receivable                        172               91              370              526
      Loss (gain) on sale of fixed assets                                 92             (106)               2               --
      Capitalized in-process research and development                     --            1,000               --               --
      Non-cash reorganization and other charges                           --               --               --           10,077
  Changes in operating assets and liabilities:
      Accounts receivable, net                                        (1,215)           3,199           (2,376)           2,753
      Income tax refund receivable                                        --           (2,000)           2,581             (566)
      Inventory                                                       (3,573)           4,334           (1,474)           4,696
      Prepaid income taxes                                             1,090              (31)            (761)             224
      Prepaid expenses and other current assets                          577              736             (331)            (135)
      Other assets                                                      (520)             (93)            (838)          (3,963)
      Accounts payable                                                 2,443           (3,175)           4,547            3,661
      Accrued expenses and other current liabilities                  (1,990)           3,085           (1,152)          (5,838)
      Other noncurrent liabilities                                      (283)            (287)             (71)          (2,575)
      Deferred income taxes                                             (389)              --             (641)          (7,140)
                                                                   ---------        ---------        ---------        ---------
        Net cash provided by operating activities                     10,712            4,007            3,749            1,496
                                                                   ---------        ---------        ---------        ---------

Cash Flows Used in Investing Activities:
  Acquisition of Alfa, net of cash acquired                               --               --          (25,500)              --
  Cash paid for Merger                                                    --         (218,200)              --               --
  Proceeds from sale of property, plant and equipment                  1,991                9              681            2,025
  Acquisition of NOVA, net of cash acquired                               --               --               --           (5,855)
  Capital expenditures                                                (9,260)          (1,662)          (8,489)          (9,858)
                                                                   ---------        ---------        ---------        ---------
        Net cash used in investing activities                         (7,269)        (219,853)         (33,308)         (13,688)
                                                                   ---------        ---------        ---------        ---------

Cash Flows (Used in) Provided by Financing Activities:
  Cash dividends                                                      (6,694)              --               --               --
  Repayment of long-term debt                                         (3,500)              --           (5,367)         (52,872)
  Issuance of long-term debt                                           3,500               --           29,150           40,600
  Repayment of short-term debt                                            --               --               --          (16,476)
  Issuance of short-term debt                                             --               --               --           20,959
  Proceeds from sale of notes                                             --          115,000               --               --
  Proceeds from term loan                                                 --           45,000               --               --
  Payment of transaction financing costs                                  --          (13,100)              --               --
  Issuance of common stock in connection with Merger                      --           69,326               --               --
  Issuance of common stock - exercise of stock options                   191               --               --               --
  Repurchase of treasury stock                                           (15)              --               --               --
  Capital contribution                                                    --               --               --           20,497
                                                                   ---------        ---------        ---------        ---------
        Net cash (used in) provided by financing activities           (6,518)         216,226           23,783           12,708
                                                                   ---------        ---------        ---------        ---------

Net (Decrease) Increase in Cash and Cash Equivalents                  (3,075)             380           (5,776)             516

Effect of exchange rate changes on cash and cash equivalents              --               --              (63)              28

Cash and Cash Equivalents, beginning of period                         9,078            6,003            6,383              544

                                                                   ---------        ---------        ---------        ---------
Cash and Cash Equivalents, end of period                           $   6,003        $   6,383        $     544        $   1,088
                                                                   =========        =========        =========        =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       42
<PAGE>   43

(1)   BASIS OF PRESENTATION

      For the period prior to November 13, 1996, the accompanying financial
      statements represent the consolidated results and financial position of
      AMTROL Inc. and Subsidiaries (the Predecessor). On November 13, 1996, the
      Predecessor merged with AMTROL Acquisition, Inc., a wholly-owned
      subsidiary of AMTROL Holdings, Inc., a Delaware corporation organized by
      The Cypress Group L.L.C. as more fully described in Note 3 (the Merger).
      Financial statements for periods subsequent to November 12, 1996 represent
      the consolidated financial statements of AMTROL Inc. and Subsidiaries (the
      Successor) after giving effect to the Merger. References to the Company
      refer to the Predecessor prior to the Merger and the Successor
      post-Merger.

(2)   ORGANIZATION AND OPERATIONS

      The Company designs, manufactures and markets products used principally in
      flow control, storage, heating and other treatment of fluids in the water
      systems market and selected sectors of the heating, ventilating and air
      conditioning ("HVAC") market. The Company offers a broad product line of
      quality fluid handling products and services marketed under widely
      recognized brand names.

(3)   MERGER AND FINANCING

      AMTROL Acquisition Inc. ("Acquisition") and AMTROL Holdings, Inc.
      ("Holdings") were formed by The Cypress Group L.L.C. ("Cypress") in 1996
      to effect the acquisition of all of the outstanding common stock of the
      Predecessor through the Merger of Acquisition with and into the Successor.
      Upon consummation of the Merger on November 13, 1996, all of the
      outstanding common stock of Acquisition was converted into common stock of
      the Successor and the Successor became a wholly-owned subsidiary of
      Holdings. The Successor, as the surviving entity, continues to be named
      AMTROL Inc. Holdings has no other material assets, liabilities or
      operations other than those that result from its ownership of the common
      stock of the Successor.

      The Merger was accounted for as a purchase transaction effective as of
      November 13, 1996, in accordance with Accounting Principles Board Opinion
      No. 16, Business Combinations, and EITF Issue No. 88-16, Basis in
      Leveraged Buyout Transactions and, accordingly, the consolidated financial
      statements for the periods subsequent to November 12, 1996 reflect the
      purchase price, including transaction costs, allocated to tangible and
      intangible assets acquired and liabilities assumed, based on their
      estimated fair values as of November 12, 1996. The excess of the purchase
      price over the fair value of net assets acquired has been allocated to
      goodwill.


                                       43
<PAGE>   44

(4)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION

      The accompanying consolidated financial statements include the accounts of
      AMTROL Inc. and its wholly owned subsidiaries (the "Company"). All
      material intercompany balances and transactions have been eliminated in
      consolidation.

      USE OF ESTIMATES

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.

      FISCAL YEAR

      The Company uses a calendar fiscal year and four quarterly interim periods
      ending on Saturday of the thirteenth week of the quarter.

      CASH AND CASH EQUIVALENTS

      Cash and cash equivalents include cash on hand and short-term investments
      that are readily convertible into cash with an original maturity to the
      Company of three months or less.

      DEPRECIABLE PROPERTY AND EQUIPMENT

      The Company provides for depreciation by charges to income (computed on
      the straight-line method) in amounts estimated to depreciate the cost of
      properties over their estimated useful lives which generally fall within
      the following ranges:

<TABLE>
<S>                                   <C>
      Building and improvements       10-40 years
      Machinery and equipment          3-12 years
      Furniture and fixtures           5-20 years
      Other                            3-10 years
</TABLE>

      Leasehold improvements are amortized over the life of the lease or the
      estimated useful life of the improvement, whichever is shorter.

      Interest costs, during the construction period, on borrowings used to
      finance construction of buildings and related property are included in the
      cost of the constructed property.


                                       44
<PAGE>   45

(4)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      INVENTORIES

      The Company's inventories are stated at the lower of cost or market
      including material, labor and manufacturing overhead (see Note 8.)

      GOODWILL

      The excess of purchase price over the fair value of net assets acquired is
      allocated to goodwill and is included in other assets. Goodwill is being
      amortized over 40 years. The Company accounts for long-lived and
      intangible assets in accordance with SFAS No. 121, Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
      Of. The Company continually reviews its intangible assets for events or
      changes in circumstances which might indicate the carrying amount of the
      assets may not be recoverable. The Company assesses the recoverability of
      the assets by determining whether the amortization of such intangibles
      over their remaining lives can be recovered through projected undiscounted
      future cash flows. The amount of impairment, if any, is measured based on
      the fair value of the impaired asset. At December 31, 1998, no such
      impairment of assets was indicated.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      In accordance with the requirements of Statement of Financial Accounting
      Standards (SFAS) No. 107, Disclosures About Fair Value of Financial
      Instruments, the Company has determined the estimated fair value of its
      financial instruments using appropriate market information and valuation
      methodologies. Considerable judgment is required to develop the estimates
      of fair value; thus, the estimates are not necessarily indicative of the
      amounts that could be realized in a current market exchange. The Company's
      financial instruments consist of cash, accounts receivable, accounts
      payable, senior subordinated notes and bank debt. The carrying value of
      these assets and liabilities is a reasonable estimate of their fair market
      value at December 31, 1998.

      RESEARCH AND DEVELOPMENT EXPENSES

      All costs for research and development, which amounted to approximately
      $0.8 million, $0.1 million, $1.3 million and $0.9 million for the periods
      ended November 12 and December 31, 1996, and fiscal years ended December
      31, 1997 and 1998, respectively, are charged to general and administrative
      expenses as incurred.


                                       45
<PAGE>   46

(4)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      INTEREST RATE SWAP AGREEMENTS

      The Company uses interest rate swap agreements to manage interest rate
      cost and the risks associated with changing interest rates. The
      differential to be paid or received is accrued as interest rates change
      and is recognized in interest expense over the life of the contract. The
      counter-party to the interest rate swap agreements is a major financial
      institution. Credit loss from counter-party non-performance is not
      anticipated.

      DEFERRED FINANCING COSTS

      Deferred financing costs are stated at cost as a component of other assets
      and amortized over the life of the related debt using the effective
      interest method. Amortization of deferred financing costs is included in
      interest expense.

      ACCRUED EXPENSES

      Certain customers are allowed a rebate if agreed upon sales targets are
      achieved for a given year. At December 31, 1997 and 1998, the Company has
      accrued $3.3 million and $3.2 million, respectively, for such volume
      allowances. These amounts are included in accrued expenses in the
      accompanying consolidated balance sheets.

      COMPREHENSIVE INCOME

      As of January 1, 1998, the Company adopted Statement of Financial
      Accounting Standards No. 130, Reporting Comprehensive Income. Statement
      130 establishes new rules for the reporting and display of comprehensive
      income and its components. The adoption of this Statement had no impact on
      the Company's net loss or shareholders' equity. Statement 130 requires
      certain items which previously had been reported separately in
      shareholders' equity to be included in other comprehensive income. For the
      Company, the only such item was the foreign currency cumulative
      translation adjustment. Prior year financial statements have been
      reclassified to conform to the requirements of Statement 130.

      INTERNATIONAL SALES

      For the periods ended November 12 and December 31, 1996, and in fiscal
      1997 and 1998, net sales to customers in various geographic areas outside
      the United States and Canada, primarily Mexico, Western Europe and Asia,
      amounted to $19.7 million, $1.9 million, $39.4 million and $73.2 million,
      respectively.


                                       46
<PAGE>   47

(4)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      FOREIGN CURRENCY TRANSLATION

      The accounts of AMTROL-ALFA, Metalomecanica S.A. and NOVA Wassererwarmer
      GmbH (see Note 5) have been translated into United States Dollars. Assets
      and liabilities have been translated at the year-end rate of exchange,
      shareholders' equity at historical rates and income statement accounts at
      the average exchange rates prevailing during the year. The cumulative
      effect of the resulting translation is reflected as a separate component
      of shareholders' equity.

      STOCK OPTIONS

      The Company accounts for employee stock options in accordance with SFAS
      No. 123, Accounting for Stock Based Compensation. As permitted under SFAS
      No. 123, the Company applies Accounting Principles Board Opinion No. 25,
      Accounting for Stock Issued to Employees to account for its stock option
      plans.

      RECLASSIFICATION

      Certain prior year balances have been reclassified to conform with the
      current year presentation.

(5)   ACQUISITIONS

      On June 30, 1997, the Company entered into a Promissory Agreement and a
      Complementary Document to the Promissory Agreement (collectively, the
      "Purchase Agreements") to acquire all the outstanding capital shares of
      Petroleo Mecanica ALFA, S.A., a corporation organized under the laws of
      Portugal ("ALFA"), for $25.5 million (United States Dollars) plus assumed
      debt of $8.7 million. The Company assumed immediate management control of
      ALFA and, accordingly, the operating results and financial position of
      ALFA are included in the Company's consolidated results of operations and
      consolidated balance sheets from July 1, 1997. The Company paid $20
      million of the purchase price on June 30, 1997 from borrowings available
      under its revolving credit facility and paid the remaining $5.5 million
      upon final closure of the transaction in December 1997. The Company's 1997
      income from operations includes $1.9 million relating to the operations of
      ALFA subsequent to July 1, 1997. The following represents proforma net
      sales and net loss as though the acquisition of ALFA occurred as of
      January 1, 1997 (in thousands): Net sales $192,068, net loss $8,600.
      ALFA's name was changed to AMTROL-ALFA, Metalomecanica S.A. following the
      acquisition.

      On June 9, 1998, the Company acquired NOVA Wassererwarmer GmbH ("NOVA")
      located in Donaueschingen, Germany for approximately $6.0 million (United
      States Dollars) plus assumed debt of $2.0 million. NOVA manufactures
      high-end residential and commercial water heaters which are marketed
      primarily in Germany, Switzerland and Austria. This acquisition provides
      AMTROL with expanded manufacturing and distribution capabilities in
      central Europe, in addition to the opportunity to offer many of AMTROL's
      complementary hydronic heating and water systems products in the European


                                       47
<PAGE>   48

      market. AMTROL assumed immediate management control of NOVA and,
      accordingly, the operating results and financial position of NOVA are
      included in the consolidated results of operations and consolidated
      balance sheets of AMTROL from the acquisition date. The Company's 1998
      income from operations include approximately $0.4 million relating to the
      operations of NOVA. The following represents proforma net sales and net
      income as though the acquisition of NOVA occurred as of January 1, 1998
      (in thousands): Net sales $207,861, net loss $13,277.

(6)   DIVESTITURES

      In May 1997, the Company sold all of the assets, subject to substantially
      all liabilities, of its American Granby Inc. subsidiary. Accordingly, the
      results of American Granby included in the accompanying consolidated
      statements of operations are as follows (in thousands):

<TABLE>
<CAPTION>
                        PREDECESSOR
                          COMPANY                      SUCCESSOR COMPANY
                         ---------        -------------------------------------------
                        PERIOD ENDED     PERIOD ENDED      YEAR ENDED       YEAR ENDED
                        NOVEMBER 12,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                            1996             1996             1997             1998
                         ---------        ---------        ---------        ---------
<S>                      <C>               <C>              <C>                <C>
Net Sales                $ 17,980          $ 1,592          $ 7,576            $ -
Operating Income         $    130          $     1          $    23            $ -
</TABLE>

      Also in May 1997, the Company sold its Peru, Indiana production facility
      and the related pump business. AMTROL transferred certain production
      activities performed in Peru to the Company's West Warwick, Rhode Island
      facility.

      The Company utilized the net proceeds of the sales of approximately $6.0
      million to fund seasonal working capital demands as well as the
      acquisition of ALFA (see Note 5).

(7)   PLANT CLOSINGS, REORGANIZATION AND RESTRUCTURING CHARGES

      In September 1997, the Company ceased operations of its Singapore
      production facility and transferred production of its non-returnable
      chemical containers to its ALFA facility in Guimaraes, Portugal. The
      Company closed its Nashville, Tennessee production facility in December
      1997 and transferred certain production lines to its West Warwick, Rhode
      Island facility. The Company's 1997 results include a pretax charge to
      operating expense of $5.5 million in connection with these plant closures.
      Costs involved in closing the Nashville facility and starting production
      in West Warwick have been higher than anticipated due to unexpected
      retrofitting and reconditioning required for the relocated equipment,
      damage to equipment during shipment, and delays in preparing the Nashville
      building for sale. The Company recorded charges in 1998 relating to the
      incremental costs associated with the Nashville closure and production
      relocation approximating $7.8 million (including $3.3 million of
      production inefficiencies included in cost of goods sold). In addition,
      the Company recorded management restructuring charges of $3.7 million in
      connection with the discontinuation and reduction of certain product lines
      and a reorganization of its management group.


                                       48
<PAGE>   49

      The Company has been experiencing an unusually high level of warranty
      claims for a particular product manufactured in 1995-1996, the cause of
      which has since been corrected. Actions taken by the Company to mitigate
      the level of returns for products manufactured during that time period
      have not reduced the return rate to the extent expected. Accordingly, the
      Company recorded an additional loss provision in the second quarter of
      1998 $4.5 million for abnormal warranty costs relating to this product.

(8)   INVENTORIES

      Inventories were as follows at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                           1997            1998
                                                         -------         -------
<S>                                                      <C>             <C>
Raw materials and work in process                        $13,670         $14,548
Finished goods                                            15,914           9,771
                                                         -------         -------
                                                         $29,584         $24,319
                                                         =======         =======
</TABLE>

      During the fourth quarter of 1998, the Company changed its method of
      determining the cost of inventories from the LIFO method to the FIFO
      method. Under the current environment of strict cost control combined with
      increased capacity utilization resulting from the consolidation of plants,
      the Company believes that the FIFO method will result in a better
      measurement of operating results. Also, the FIFO inventory valuation
      method is the more commonly used method among the other companies serving
      the markets in which AMTROL operates. This change has been applied by
      retroactively restating the accompanying consolidated financial
      statements. Although this change in method did not impact the 1998 or 1997
      net loss, it increased the net loss for the period ended December 31, 1996
      by approximately $1.1 million. The retained deficit balances for the years
      ended December 31, 1997 and 1998 have been adjusted for the effect, net of
      income tax benefit, of applying retroactively the new method of valuing
      inventories.

(9)   LONG-TERM DEBT AND NOTES PAYABLE TO BANKS

      Long-term debt consisted of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                             1997         1998
                                                           --------     --------
<S>                                                        <C>          <C>
Revolving credit facility                                  $  4,000     $  3,000
Tranche A Term Loan                                          19,425       10,200
Tranche B Term Loan                                          44,698       44,237
Senior subordinated notes, due 2006, 10.625%                115,000      115,000
Other                                                         4,539        4,629
                                                           --------     --------
                                                            187,662      177,066
Less: Current maturities of long-term debt                    3,498        4,043
                                                           --------     --------
                                                           $184,164     $173,023
                                                           ========     ========
</TABLE>


                                       49
<PAGE>   50

      REVOLVING CREDIT AND TERM LOANS

      The Company is party to a Bank Credit Agreement (the "Agreement"), which
      provides for secured borrowings from a syndicate of lenders. The Agreement
      was amended on July 31, 1998 to allow for the early repayment of a portion
      of the principal outstanding and to modify certain covenants to be more in
      line with the Company's business plans. The Agreement, as amended,
      provides for senior term loans (the "Term Loans") and a Revolving Credit
      Facility. In connection with the amendment to the Agreement, the Company
      repaid $20.5 million on August 3, 1998. A portion ($10.2 million) of the
      Term Loans (the "Tranche A Term Loans") will mature on May 13, 2002, with
      quarterly amortization payments during the term of such loans. As a result
      of the August 3, 1998 repayment, no further amortization payments on
      Tranche A term loans were required in 1998. The remainder ($44.2 million)
      of the Term Loans (the "Tranche B Term Loans") will mature on May 13,
      2004, with nominal quarterly amortization prior to the maturity of the
      Tranche A Term Loans and with the remaining amounts amortizing on a
      quarterly basis thereafter. The Revolving Credit Facility of $30.0 million
      includes a sublimit providing for up to $20.0 million of availability on a
      revolving credit basis to finance permitted acquisitions. The highest
      amount outstanding during 1998 was $22.7 million. The commitments under
      the Revolving Credit Facility and the acquisition sublimit will reduce by
      $5.0 million on November 13, 2000 and $10.0 million on November 13, 2001.
      The Revolving Credit Facility will mature on May 13, 2002. The Agreement
      is secured by substantially all of the assets of the Company and its
      domestic subsidiaries.

      The loans under the Agreement bear interest, at the Company's option, at
      either (A) a "base rate" equal to the higher of (i) the federal funds rate
      plus 0.5% or (ii) the bank's prime lending rate plus (x) in the case of
      Tranche A Term Loans and loans under the Revolving Credit Facility, an
      applicable spread ranging from 0.75% to 1.50% (determined based on the
      Company's leverage ratio) or (y) in the case of Tranche B Term Loans,
      2.00%; or (B) a `Eurodollar rate" plus (x) in the case of Tranche A Term
      Loans and loans under the Revolving Credit Facility, an applicable spread
      ranging from 1.75% to 2.50% (determined based on the Company's leverage
      ratio), or (y) in the case of Tranche B Term Loans, 3.00%. Swingline Loans
      may only be "base rate" loans.

      The Revolving Credit Facility also requires the Company to pay a
      commitment fee on the average daily aggregate unutilized portion of the
      Revolving Credit Facility at a rate of 0.5% per annum, payable quarterly
      in arrears, as well as a commission on trade and standby letters of credit
      of 1.25% per annum of the amount to be drawn under the Agreement. Amounts
      outstanding under the Revolving Credit Facility are due on May 13, 2002.

      The Agreement contains a number of covenants that, among other things,
      restrict the ability of the Company and its subsidiaries to dispose of
      assets, incur additional indebtedness, incur guaranty obligations, repay
      other indebtedness or amend other debt instruments, pay dividends, create
      liens on assets, enter into leases, make investments, make acquisitions,
      engage in mergers or consolidations, make capital expenditures, engage in
      certain transactions with subsidiaries and affiliates and otherwise
      restrict corporate activities. In addition, the Agreement requires
      compliance with certain financial covenants, including requiring the
      Company to maintain a minimum level of earnings before income taxes,
      depreciation and amortization (i.e., "EBITDA"), a minimum ratio of EBITDA
      to interest


                                       50
<PAGE>   51

      expense and a maximum ratio of Indebtedness to EBITDA, in each case tested
      at the end of each fiscal quarter of the Company.

      The Company's obligations under the Agreement are guaranteed by Holdings
      and each direct and indirect domestic subsidiary of the Company. The
      Company's obligations under the Agreement are secured by substantially all
      assets of the Company and its subsidiaries.

      The company has entered into interest rate swap agreements which have
      effectively converted $15.0 million of floating rate borrowings to fixed
      borrowings through June 2004. The agreements are contracts to periodically
      exchange floating interest rate payments for fixed rate payments over the
      life of the agreements and are used to manage the Company's interest rate
      exposure.

      SENIOR SUBORDINATED NOTES

      In connection with the Merger, the Company issued $115.0 million of Senior
      Subordinated Notes due 2006 (the "Notes"). The Notes are unsecured
      obligations of AMTROL. The Notes bear interest at a rate of 10.625% per
      annum which is payable semi-annually on each June 30 and December 31
      commencing on June 30, 1997.

      The Notes are redeemable at the option of the Company on or after December
      31, 2001. The Notes will be subject to redemption, in whole or in part, at
      various redemption prices, declining from 105.313% of the principal amount
      to par on and after December 31, 2003. In addition, on or prior to
      December 31, 1999, the Company may use the net cash proceeds of one or
      more equity offerings to redeem up to 35% of the aggregate principal
      amount of the Notes originally issued at a redemption price of 110.625% of
      the principal amount thereof plus accrued interest to the date of
      redemption. Upon a "Change of Control" (as defined in the Indenture), each
      Note holder has the right to require the Company to repurchase such
      holder's Notes at a purchase price of 101% of the principal amount plus
      accrued interest.

      The Note Indenture contains certain affirmative and negative covenants and
      restrictions.

      As of December 31, 1998, the Company was in compliance with the various
      covenants of the Bank Credit Agreement and the Note Indenture.

      OTHER LONG-TERM DEBT

      Other long-term debt represents borrowings assumed by the Company in
      connection with the 1997 acquisition of ALFA and 1998 acquisition of NOVA.
      The debt includes the equivalent of approximately $3.5 million of loans
      payable to the Industrial Development Fund of Portugal as well as several
      local Portuguese banks. The loans amortize in roughly equal installments
      through 2000 and accrue interest at LIBOR plus a premium ranging from
      1.25% to 1.5%, adjusted quarterly or semi-annually. The loans are secured
      by substantially all property and equipment owned by ALFA. ALFA also has
      available revolving credit facilities with local banks providing for
      short-term working capital loans of up to the equivalent of approximately
      $9.2 million. Borrowings under these agreements accrue interest at LIBOR
      plus a premium ranging from 0.375% to 1.375%. The balance


                                       51
<PAGE>   52

      outstanding at December 31, 1998 was approximately $9.2 million, the
      highest amount outstanding under these facilities in 1998. Other long-term
      debt also includes the equivalent of approximately $1.1 million of loans
      payable to two local German banks. These loans amortize in roughly equal
      installments through 2002 and accrue interest at rates ranging from 6.0%
      to 6.5%. The loans are secured by substantially all property and certain
      equipment owned by NOVA. NOVA also has available revolving credit
      facilities with a local bank providing for short-term working capital
      loans of up to the equivalent of approximately $1.5 million. Borrowings
      under the agreement accrue interest at prevailing market rates which
      averaged approximately 7.4% during the period ended December 31, 1998. The
      balance outstanding at December 31, 1998 was approximately $1.5 million,
      the highest amount outstanding under the facility in 1998.

      Cash paid for interest amounted to approximately $0.1 million, $0, $19.2
      million and $19.0 million for the periods ended November 12, 1996 and
      December 31, 1996, and fiscal years ended December 31, 1997 and 1998,
      respectively.

(10)  INCOME TAXES

      The components of the provision (benefit) for income taxes are as follows
      (in thousands):

<TABLE>
<CAPTION>
                        PREDECESSOR
                          COMPANY                      SUCCESSOR COMPANY
                         ---------        -------------------------------------------
                        PERIOD ENDED     PERIOD ENDED      YEAR ENDED       YEAR ENDED
                        NOVEMBER 12,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                            1996             1996             1997             1998
                         ---------        ---------        ---------        ---------
<S>                       <C>              <C>              <C>              <C>
Current:
     Federal              $ 5,233          $(1,376)         $    --          $    --
     State                    258              (23)              --               --
     Foreign                   --               --              714              188
                          -------          -------          -------          -------
                            5,491           (1,399)             714              188

Deferred:
     Federal                  622             (564)            (625)          (5,854)
     State                     39                7             (119)          (1,062)
                          -------          -------          -------          -------
                              661             (557)            (744)          (6,916)
                          -------          -------          -------          -------
                          $ 6,152          $(1,956)         $   (30)         $(6,728)
                          =======          =======          =======          =======
</TABLE>

      The deferred income tax provision resulted primarily from temporary
      differences due to the use of accelerated depreciation for income tax
      purposes and straight-line depreciation for financial statement purposes,
      temporary differences related to deferred compensation and the reversal of
      temporary differences related to safe-harbor lease transactions that had
      previously transferred tax benefits to the Company.

      The difference between a provision computed using the respective statutory
      U.S. federal income tax rate and the provision for income taxes in the
      accompanying consolidated financial statements is primarily the result of
      state taxes, net of federal benefit.


                                       52
<PAGE>   53

      Significant items giving rise to deferred tax assets and deferred tax
      liabilities at December 31, 1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             1997         1998
                                                           -------      -------
<S>                                                        <C>          <C>
Prepaid Income Taxes:
  Warranty reserves - current                              $   239      $    96
  Allowance for doubtful accounts                              354          411
  Plant closing reserve                                        744          302
  Accrued vacation                                             187          122
  UNICAP adjustment                                            365          285
  Accrued management restructuring                              --          405
  Other                                                        606          650
                                                           -------      -------
                                                           $ 2,495      $ 2,271
                                                           =======      =======

<CAPTION>
                                                             1997         1998
                                                           -------      -------
<S>                                                        <C>          <C>
Deferred Income Taxes:
  Net operating loss carryforward                          $ 1,617     $  7,533         
  Accelerated depreciation                                  (2,553)      (2,847)        
  Safe harbor leases                                          (163)         (65)           
  Warranty reserves - long-term                                780        1,683        
  Deferred compensation and restricted stock plan              676          700         
  LIFO revaluation                                             646          646        
  Other                                                         62          555          
                                                           -------      -------
                                                           $ 1,065      $ 8,205       
                                                           =======      =======
</TABLE>

      The difference between the Company's effective income tax rate and the
      federal statutory income tax rate primarily results from state income tax,
      net of federal tax benefit, and non-deductible goodwill amortization.

      Cash paid for income taxes amounted to $4.3 million, $0, $0, and $0.3
      million for the periods ended November 12, 1996 and December 31, 1996, and
      fiscal years ended December 31, 1997 and 1998, respectively.

(11)  PENSION AND PROFIT SHARING PLANS

      The Company has a defined contribution 401(k) plan covering substantially
      all of its domestic employees. Under the Plan, eligible employees are
      permitted to contribute up to 15% of gross pay, not to exceed the maximum
      allowed under the Internal Revenue Code. The Company matches each employee
      contribution up to 6% of gross pay at a rate of $0.25 per $1 of employee
      contribution. The Company also contributes 3% of each employee's gross pay
      up to the Social Security taxable wage base and 4% of amounts in excess of
      that level up to approximately $0.2 million of wages. Company
      contributions to the 401(k)


                                       53
<PAGE>   54

      plan totaled approximately $0.9 million and $0.1 million for the periods
      ending November 12 and December 31, 1996, respectively, and $1.1 million
      and $1.0 million for the years ended December 31, 1997 and 1998,
      respectively.

(12)  LEASE COMMITMENTS

      The Company leases certain plant facilities and equipment. Total rental
      expenses charged to operations approximated $1.0 million and $0.2 million
      for the periods ended November 12 and December 31, 1996, and $1.5 million
      and $1.9 million for the years ended December 31, 1997 and 1998,
      respectively. Minimum rental commitments under all non-cancelable
      operating leases are as follows (in thousands):

<TABLE>
<S>                                               <C>
                           1999                   $  980
                           2000                      866
                           2001                      637
                           2002                      372
                           2003                       --
                                                  ------
                                                  $2,855
</TABLE>

      Certain of the leases provide for renewal options.

(13)  COMMITMENTS AND CONTINGENCIES

      At December 31, 1998, the Revolving Credit Facility contains a sublimit to
      support the issuance of letters of credit in the amount of $5.0 million
      with approximately $1.1 million outstanding.

      The Company is involved in various legal proceedings which, in the opinion
      of management, will not result in a material adverse effect on its
      financial condition or results of operations.

(14)  STOCK PLANS

      On December 16, 1997, the board of directors of the Company's parent,
      AMTROL Holdings, Inc., approved the Holdings 1997 Incentive Stock Plan and
      immediately granted to certain key employees options to purchase 65,310
      shares of the common stock of Holdings for $100 per share. As of December
      31, 1998, options to purchase 51,634 shares were outstanding. The
      outstanding options include 25,817 non-qualified options which are
      exercisable immediately provided that purchased shares are subject to
      repurchase by Holdings at the exercise price until such shares vest based
      on relative achievement of management's business plan for fiscal years
      1997 through 2001. An additional 22,398 non-qualified options are also
      immediately exercisable but are subject to repurchase by Holdings, in
      monthly diminishing amounts, if the holder terminates employment before
      August 2000. The remaining 3,419 options are incentive stock options of
      which 1,999 are vested at December 31, 1998 and the remainder are released
      from restrictions ratably through August 2000. There were no options
      issued under these plans in 1998.


                                       54
<PAGE>   55

      The Company applies APB opinion No. 25 to account for its stock option
      plans. Accordingly, pursuant to the terms of the 1997 Holdings Incentive
      Stock Plan, no compensation cost related to the issuance of stock options
      has been recognized in the Company's financial statements. However, if the
      Company had determined compensation cost for options issued in 1997 under
      the provisions of SFAS No. 123, the Company's net loss in 1997 would have
      increased by approximately $0.6 million. In 1998, adjustments to
      compensation expense associated with the options issued in 1997 would have
      approximated $.1 million as a result of forfeitures by certain individuals
      who left the Company. The fair value of the options granted in 1997 were
      estimated using the Black-Scholes option pricing model. The following key
      assumptions were used to value the options granted in 1997: volatility, 0;
      weighted average risk free rate, 5.00%; average expected life, 3 years.
      The weighted average fair value per share of the stock options granted in
      1997 amounted to $13.62. It should be noted that the option pricing model
      used was designed to value readily tradeable stock options with relatively
      short lives. The options granted are not tradeable. However, management
      believes that the assumptions used and the model applied to value the
      awards yield a reasonable estimate of the fair value of the options grants
      under the circumstances.

      In connection with the Merger, certain holders of options to purchase
      shares of the common stock of the predecessor exchanged such options for
      Amended Options to purchase an aggregate of 17,041 shares of Holdings
      common stock with weighted average exercise price of $57.38 per share. All
      such options are immediately exercisable. No options from any source were
      exercised in 1997 or 1998.

(15)  BUSINESS SEGMENT INFORMATION

      The Company adopted SFAS No. 131, Disclosure about Segments of an
      Enterprise and Related Information, in 1998. AMTROL's reportable segments
      are delineated geographically. The segments are managed separately because
      of their different product offerings, markets served, manufacturing
      processes and cost structures. As the Company rationalizes its
      manufacturing capacity and manages its markets, the frequency of overlap
      of products and markets between segments has increased.

      The Company's North American segment operates manufacturing facilities in
      Rhode Island, Kentucky, Maryland and Ohio, and operates a distribution
      facility in Ontario, Canada. This segment manufactures and markets
      products used principally in flow control, storage, heating, and other
      treatment of fluids in the water system and HVAC markets. These products
      are marketed throughout the world but primarily in North America, Western
      Europe, Asia and Mexico.

      The Company's European segment includes the Company's facilities in
      Guimaraes, Portugal and Donaueschingen, Germany. The Guimaraes facility
      manufactures returnable and non-returnable steel gas cylinders for storing
      cooking, heating and refrigerant gases which are marketed throughout
      Europe, the Middle East and Africa, as well as the Far East, with sales of
      $49.6 million. The Donaueschingen facility manufactures and distributes
      residential and commercial water heaters which are marketed primarily in
      Switzerland, Austria and Germany with sales of $8.7 million.


                                       55
<PAGE>   56

      The primary criteria by which financial performance is evaluated and
      resources are allocated include revenues and operating income. The
      following is a summary of key financial data by segment (prior to 1997,
      North America was the Company's only segment):

<TABLE>
<CAPTION>
                                              1996          1997          1998
                                            --------      --------      --------
<S>                                         <C>           <C>           <C>
SALES TO EXTERNAL CUSTOMERS
   North America                            $170,821      $158,627      $143,817
   Europe                                         --        17,805        58,325
                                            --------      --------      --------
   Consolidated                             $170,821      $176,432      $202,142
                                            ========      ========      ========

INCOME FROM OPERATIONS
   North America                            $ 12,813      $  8,127      $  8,280
   Europe                                         --         1,907         3,382
                                            --------      --------      --------
   Consolidated                             $ 12,813      $ 10,034      $ 11,662
                                            ========      ========      ========

DEPRECIATION AND AMORTIZATION
   North America                            $  5,184      $ 10,396      $ 10,143
   Europe                                         --         1,145         3,004
                                            --------      --------      --------
   Consolidated                             $  5,184      $ 11,541      $ 13,147
                                            ========      ========      ========

CAPITAL EXENDITURES
   North America                            $ 10,922      $  6,437      $  7,807
   Europe                                         --         2,052         2,051
                                            --------      --------      --------
   Consolidated                             $ 10,922      $  8,489      $  9,858
                                            ========      ========      ========

IDENTIFIABLE ASSETS
   North America                            $184,645      $178,926      $176,639
   Europe                                         --        36,545        46,310
                                            --------      --------      --------
   Consolidated                             $184,645      $215,471      $222,949
                                            ========      ========      ========
</TABLE>

      Operating income above is shown before the provision for abnormal warranty
      costs, plant closing and restructuring charges and management
      restructuring charges, all of which relate to the North American business
      segment. The following table summarizes sales by product classification:

<TABLE>
<CAPTION>
                                             1996            1997            1998
                                            -----           -----           -----
<S>                                         <C>             <C>             <C>
HVAC                                         49.7%           53.8%           60.5%
Water Systems                                50.3%           46.2%           39.5%
                                            -----           -----           -----
Consolidated                                100.0%          100.0%          100.0%
                                            =====           =====           =====
</TABLE>

      The percentages above exclude sales by the American Granby subsidiary
      which was sold by the Company in 1997.


                                       56
<PAGE>   57

ITEM 14(A)(2)  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND
               RESERVES

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                        BALANCE AT
                                       BEGINNING OF                 BALANCE AT
          CONSOLIDATED                    PERIOD      PROVISION     RECOVERIES      WRITE-OFFS      END OF PERIOD
---------------------------------      ------------   ---------     ----------      ----------      -------------
<S>                                       <C>           <C>             <C>           <C>                 <C>
PREDECESSOR

Period ended November 12, 1996
  Allowance for doubtful accounts           990           172           21              (108)             1,075
  Inventory                                 174         1,792           --              (894)             1,072

SUCCESSOR

Period ended December 31, 1996
  Allowance for doubtful accounts         1,075            91            4              (115)             1,055
  Inventory                               1,072           238           --                --              1,310

Year ended December 31, 1997
  Allowance for doubtful accounts         1,055           370            3              (340)*            1,088
  Inventory                               1,310           516           --              (622)             1,204

Year ended December 31, 1998
  Allowance for doubtful accounts         1,088           526           42               (62)             1,594
  Inventory                               1,204         2,000           --            (1,033)             2,171
</TABLE>

* Includes $135 related to the disposition of the Company's American Granby
  subsidiary in May 1997.


                                       57
<PAGE>   58

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 5(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in West Warwick, Rhode
Island, on the 30th day of March 1999.

                                          AMTROL Inc.

                                          By:   /s/ Donald W. Reilly
                                             -----------------------------------
                                                   Donald W. Reilly
                                                Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.

<TABLE>
<CAPTION>
        SIGNATURE                      TITLE                                    DATE
        ---------                      -----                                    ----
<S>                           <C>                                          <C>
  /s/  John P. Cashman        Chairman of the Board                        March 30, 1999
---------------------------
       John P. Cashman

  /s/  Albert D. Indelicato   President, Chief Executive Officer           March 30, 1999
---------------------------   and Director
       Albert D. Indelicato

  /s/  Donald W. Reilly       Vice President, Chief Financial Officer,     March 30, 1999
---------------------------   and Treasurer (principal
       Donald W. Reilly       financial officer)

  /s/  Paul Kawa              Controller, Director of Finance              March 30, 1999
---------------------------   (principal accounting officer)
       Paul Kawa

  /s/  Andrew M. Massimilla   Director                                     March 30, 1999
---------------------------
       Andrew M. Massimilla

  /s/  David P. Spalding      Director                                     March 30, 1999
---------------------------
       David P. Spalding

  /s/  James A. Stern         Director                                     March 30, 1999
---------------------------
       James A. Stern

  /s/  Anthony D. Tutrone     Director                                     March 30, 1999
---------------------------
       Anthony D. Tutrone
</TABLE>


                                       58
<PAGE>   59

                                  EXHIBIT INDEX

EXHIBIT #                         DOCUMENT DESCRIPTION
---------                         --------------------

3.1         Restated Articles of Incorporation of AMTROL Inc. (incorporated by
            reference from the Company's Registration Statement on Form S-4,
            Registration No. 333-18075, declared effective by the Securities and
            Exchange Commission on January 2, 1997).

3.2         Bylaws of AMTROL Inc. (incorporated by reference from the Company's
            Registration Statement on Form S-4, Registration No. 333-18075,
            declared effective by the Securities and Exchange Commission on
            January 2, 1997).

4.1         Indenture, dated as of November 1, 1996 between AMTROL Acquisition,
            Inc. and The Bank of New York (incorporated by reference from the
            Company's Registration Statement on Form S-4, Registration No.
            333-18075, declared effective by the Securities and Exchange
            Commission on January 2, 1997).

4.2         Form of 10-5/8% Senior Subordinated Notes due 2006 (included in
            Exhibit 4.1) (incorporated by reference from the Company's
            Registration Statement on Form S-4, Registration No. 333-18075,
            declared effective by the Securities and Exchange Commission on
            January 2, 1997).

4.3         First Supplemental Indenture, dated as of November 13, 1996, between
            AMTROL Inc. and The Bank of New York (incorporated by reference from
            the Company's Registration Statement on Form S-4, Registration No.
            333-18075, declared effective by the Securities and Exchange
            Commission on January 2, 1997).

10.1        Credit Agreement, dated as of November 13, 1996, among AMTROL
            Acquisition, Inc. and AMTROL Holdings, Inc., various lending
            institutions party thereto, Morgan Stanley Senior Funding, Inc. as
            documentation agent, and Bankers Trust Company, as administrative
            agent (incorporated by reference from the Company's Registration
            Statement on Form S-4, Registration No. 333-18075, declared
            effective by the Securities and Exchange Commission on January 2,
            1997).

10.1.1      First Amendment to Credit Agreement, dated as of June 24, 1997
            (incorporated by reference to the Company's Quarterly Report on Form
            10-Q for the quarter ended July 5, 1997).

10.1.2      Second Amendment to Credit Agreement, dated as of December 12, 1997
            (incorporated by reference to Exhibit 7(c) in the Company's Current
            Report on Form 8-K dated December 22, 1997).

10.1.3      Third amendment to the Credit Agreement dated as of June 24, 1998
            (incorporated by reference to the Company's Quarterly report on Form
            10-Q for the quarter ended July 4, 1998).

10.1.4      Fourth amendment to the Credit Agreement dated as of July 13, 1998
            (incorporated by reference to the Company's Quarterly report on Form
            10-Q for the third quarter ended October 3, 1998).

10.2        AMTROL Inc. Pension Plan and Trust (incorporated by reference from
            the Company's Registration Statement on Form S-1, Registration No.
            33-48413, declared effective by the Commission on March 18, 1993).*


                                       59
<PAGE>   60

10.3        Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by
            reference from the Company's Registration Statement on Form S-1,
            Registration No. 33-48413, declared effective by the Securities and
            Exchange Commission on March 18, 1993).*

10.4        AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference
            from the Company's Annual Report on Form 10-K for the fiscal year
            ended December 31, 1994).*

10.5        AMTROL Inc. Supplemental Retirement Plan II (incorporated by
            reference from the Company's Registration Statement on Form S-1,
            Registration No. 33-48413, declared effective by the Commission on
            March 18, 1993).*

10.6        First Amendment to AMTROL Inc. Supplemental Retirement Plan II
            (incorporated by reference from the Company's Annual Report on Form
            10-K for the fiscal year ended December 31, 1995).*

10.8        Employment Agreement dated June 22, 1998 by and between AMTROL Inc.
            and Donald W. Reilly.*

10.9        Employment Agreement dated January 19, 1997 by and between AMTROL
            Inc. and Edward J. Cooney. (incorporated by reference to the
            Company's Annual Report on Form 10-K for the period ended December
            31, 1996).*

10.10       Employment Agreement dated June 24, 1998 by and between AMTROL Inc.
            and Albert D. Indelicato.*

10.11       AMTROL Holdings Inc. 1997 Incentive Stock Plan dated December 16,
            1997.* (incorporated by reference to the Company's Annual Report on 
            Form 10-K for the period ended December 31, 1997).

18          Preferability letter regarding change in accounting policy from LIFO
            to FIFO

21          Subsidiaries of AMTROL Inc.

27          Financial Data Schedule

* Management contract or compensatory plan arrangement.


                                       60